Too many Americans have credit card debt. US News & World Report conducted a survey in May 2020 to find out how Americans were affected by debt during the coronavirus pandemic. In the survey, 29% of those surveyed have used a top-up transfer credit card at least once, and 23% of those who have used a debt settlement or at least paid less interest than they did without the card.
If you are struggling with debt on multiple credit cards, one option may be to use a credit transfer credit card to consolidate your debt. What does balance transfer mean? We are here to give you all the details.
What does balance transfer mean?
One question that keeps coming up is what balance transfer means. This is a process of moving high-yield debt from one or more cards to another card with a lower, cheaper interest rate. The goal is to pay off debts faster by putting your payments on principal instead of monthly interest payments. Transferring the balance from multiple cards to a single card makes managing your payments much easier by receiving a single monthly payment for all of your debts.
Here are some important facts about credit transfer credit cards:
- Credit card companies accept transfers of credit other than credit cards.
- A good or excellent credit rating is often required for an APR of 0%.
- The average fee is 3.04% of the amount you transfer.
- If you are approved for a low APR and can pay off your debt before the regular higher APR takes effect, it is usually worth a balance transfer.
How does a balance transfer work?
Now that we’ve answered what it means, we’ll examine exactly how it works.
When you transfer your debt from one card to another, the credit card issuer pays off your debt with the original lender. This shifts your payment responsibilities to the new lender as your older credit card is now being paid off.
You can request a wire transfer when applying for a credit card or waiting for approval. But sooner is better. Many credit card companies offer reduced rates and fees for credit transfers within the first few months after opening the account.
To carry out a balance transfer, you will need:
- The account number or numbers for your existing debt
- How much do you want to transfer?
- All of your personal information for a standard credit card application, such as your name, social security number, employment information, and annual income
Once you have deposited your debt on the balance transfer credit card, it is your responsibility to pay the minimum monthly amount to keep your account in good shape and to keep your APR lower. That being said, you may want to pay more than the minimum amount to pay off your debt before the higher APR kicks in. This lower APR implementation period can range from 15 to 21 months. Make sure you have enough time to pay off all of your debts. If you go over the low price period, you end up paying extra.
Should I carry out a balance transfer?
Before choosing an issuer, make sure you read the fine print. Double check the fee as some can be as high as 5% of the amount you transferred and look for a credit card with no annual fee.
You should also check to see if the lender has any credit limit restrictions and if there are any restrictions on certain cards. Credit limits are determined by the issuer’s rating of your credit along with other factors. You may not be eligible for a limit that covers the amount you want to transfer.