Credit transfers are a type of offer from credit card companies, banks, or credit unions. They allow you to transfer debt from one account to another.
Commonly, credit transfers are used to transfer high-interest credit card debt to a new, low-interest credit card. But they can also be used to transfer other types of credit and debts to one credit card.
It can also be a way to consolidate multiple debts without taking out a debt consolidation loan.
The idea behind balance transfers
The idea behind a balance transfer is to lower the interest rate you pay on credit card debt. So you can pay it off faster or easier. With that in mind, they can offer some relief from expensive debt.
People usually try to get 0% credit transfer offers. In this way, all of your monthly payment goes towards reducing debt. (Instead of paying interest on a large part of it.)
For example, if your current credit card charges 16.17% interest and you have $ 5,000 in credit, you can save a package by transferring to a 0% card. If everything goes right.
But there are also some disadvantages, especially if you don’t pay back the full amount before the introductory period ends. Make sure you understand the pros and cons of credit transfers before applying for one.
What to look out for with a credit transfer card
Lately, 0% credit transfers are getting harder to find. But if you want to do one, you should still consider good prepaid transfer cards that:
- Offer 0% or low interest
- have a long introductory period (where you get the lower interest rates)
- have low transfer fees
- You will likely be approved based on your credit rating
- have no APR penalty
Make sure the card you choose has terms and tariffs good enough to offset the fees.
How to make a credit transfer
You can do this by transferring the amount you owe from a credit card to a low or no interest rate card. The steps to perform a balance transfer are:
- Get a picture of your credit history so you know if you are likely to qualify. (They usually need good or excellent credit.)
- Do your research to find the best deals on transferring funds.
- Make sure you understand the terms and fees involved and avoid misleading offers.
- Apply for the offer you want.
- If approved, start the balance transfer within the required time frame. Depending on the card, you can do this online, by phone or by credit transfer.
- Keep paying the minimum payment on your old card while you wait for the transfer
- After going through it, make sure you make timely payments on the new card.
- To avoid new debt, stop using the old card and don’t use the new one for anything else.
Finally, if your goal is to get out of debt, use the debt snowball method.
Frequently asked questions about credit transfers
This article explains what a balance transfer is and how to do it. But people sometimes have related questions too.
What happens to the balance on your old credit card
You may be wondering what happens to your old card when you transfer the funds. The short answer is usually nothing.
Your old card will stay open until you or the credit card company close it. It will simply run out of funds once the transfer is complete. (Provided you transfer the full amount.)
Again, however, you will still need to make your minimum payment on the old card until the balance is transferred to the new one. As this can take some time, make sure you don’t miss any payment while you wait for it to complete.
Sometimes people want to make multiple credit transfers, which can mean one of two things.
In one case, the introductory phase may be over and you want to avoid the new, higher interest rate. You can search for another offer and repeat the process. Be aware, however, that every time you apply for a credit card or other loan, it will affect your credit score. It is best to pay them out before the end of the introductory phase, if possible.
In another case, you may want to transfer more than one debt to a single new card. Whether this is possible depends on the card chosen. So if that is your goal, make sure you choose a card that allows it to be done. Typically, you need to complete all transfers within a set amount of time.
The bottom line
The bottom line is that balance transfers are a way to move debt from one account to another.
they can It should, however, not be the only tool used as part of a broader debt reduction strategy. Also, avoid the pitfalls that come with it.