How a Balance Transfer Credit Card Can Help You

Most people are keen to save money wherever they can at the moment and the more sensible among us will also be looking to get our finances in order. If either of these is the case, there’s good chance the subject of balance transfer credit cards will come up eventually — but what exactly do these cards do and how can they help?

credit-cards

A popular option for balance transfer credit card is the Discover It card, which offers 0% introductory APR for 6 months on purchases and for 18 months on balance transfers.You may be able to get a good idea for how thy work from their website, but here is a bit of a quick guide for those who need it.

Balance Transfers: the Basics

A balance transfer, in short, is when you to move all or part of a debt or existing balance from one place to another. The reasons you might do this, of course, would usually relate to the fact that you want to take advantage of a lower rate of interest than you are currently paying. This is why many providers now offer these particular cards with competitive rates and introductory offers. However, one of the other reasons you may want to opt for a balance transfer is to consolidate your monthly outgoings so you just have one regular payment to make.

What Kind of Fees Can You Expect?

You’ll see by looking at some of the credit cards on offer that each is designed to suit a different type of user. Some will come with a rate that stays low for a certain period of time, others will provide a steadier rate and some will have certain rewards and loyalty programs attached. But no matter who you get a credit card with, you’ll want to know what type of fees to expect.

A balance transfer credit card is subject to terms and conditions like any other financial products, but the first thing you’ll want to see is what the agreed credit limit is, if there is a fee for moving any balances across and if there is any annual charge that is applicable.

Balance Transfers in Action

Let’s say you have a large balance on a store card — and that store card had an interest rate of 26% APR. A quick search around the internet will show you that there is a good chance you can get a credit card that offers a much more favorable rate and that, over the course of a year, switching could save you a significant amount. Make sure you not only have a favorable rate, but also a 0% offer on balance transfers for 12, or even 18, months.

It’s pretty easy to arrange a balance transfer and you’ll find potential new providers are very helpful at getting you over to them. You’ll need to provide details of the account you’re transferring from as well as the usual personal information — but you could find this speedy process really saves you money in the long term.

Photo from Wikimedia Commons.

About the Author

By , on Aug 27, 2013
Andy Tenton
Andy is a 30-something New Yorker who turned his financial life around. He took charge of his finances, got out of debt, and is now working his way toward financial success. He is the publisher of WorkSaveLive.com.

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{9 Comments}

  1. Luckily, I have always had some great 0% offers. I have never paid interest on my debt! Now to get rid of it once and for all and not have to play the game!

  2. I’ve personally seen balance transfer credit cards save tons of people tons of money. As a matter of fact, as a credit card debt consultant, for those who are not facing financial hardships, I often advise this option! Great post and thank you for making this option so easy to find for consumers!

  3. Balance transfers have really helped us pay off credit debt. You just have to be careful when you know you can’t pay it all off before the promotional period and you end up playing the balance transfer game. There are some good calculators out there that will let you know how much you’ll save and if the transfer fee is reasonable.I wish I didn’t know so much about this topic!

  4. I almost did this with our honeymoon, but then i just applied for a 0% AMEX card and booked the trip with that. I think they are a great way to slow down the bleeding if you are in credit card debt, and makes it quicker to pay down your debt.

    Thanks for the informational :)

  5. When used properly, balance transfer cards are a great tool to eliminating debt. Most companies offer a 0% interest rate for the first six months to one year and that much time without paying interest can make a huge dent in the overall balance. One thing to be careful of is making a purchase with that card – the purchase will have a higher percentage rate and can throw the payment structure of the card off. Better to view it as a debt payoff card only and not use it for expenses after that.

  6. Ornella @ Moneylicious says:

    Balance transfer can be a good strategy to pay down quicker. But you have to be careful of the expiration of the introductory period.
    I knew someone who was able to use balance transfer to pay down credit card debt and car loan quickers, too.

  7. Modest Money says:

    With both of my car loans I eventually moved the balance over to a 0% balance transfer credit card offer. It’s a great way to save money. You just have to be aware of the balance transfer fee. Also you have to keep track of when that balance transfer period expires. You don’t want to leave the balance there to get charged high interest rates. Instead transfer it to your bank line of credit or elsewhere before that happens.

  8. I have transferred balances to 0% cards many times! Luckily, there will be no more credit card debt in our lives. Have a great day!

  9. Great post. We receive many such offers, but I have not moved on them in any real way. Thanks for educating me!

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