November 20, 2022

How Do Credit Card Balance Transfers Work?

Credit cards help in times of need, but you need to acquire knowledge about their use; otherwise, you may end up in trouble.
Credit card balance transfers are one significant phenomenon common in many countries, prominently in U.S and Australia. Credit card balance transfer term is defined as shifting your existing credit card amount to another credit card to save yourself from interest. Users do credit transfers to save money and pay their debt.

Each credit card has its own interest rate, and after some time, it usually becomes problematic for people to keep paying high interest. In this regard, people typically issue new credit cards with a low-interest rate. In the initial months, some credit card offers interest-free loans, therefore, making it easier for the loaners to get rid of debt. However, others have some terms and conditions that one must consider before credit card balance transfers because violation of the agreement can even result in legal matters.

Note That:

When shifting your balance from one card to another, you must keep in mind that the banks will be different. You must understand that you are the cardholder and card issuer. You have to consider what kind of checks are given by your banks. Sometimes although it is your credit transfer, it is still seen as money you owe to an organization. Some organizations can offer a simple phone or online credit transfer, but some usually ask for a written document as well.

Just because you know that a new credit card is going to bring minimum interest, this does not mean that you can get rid of your interest. The new credit card offers are limited for some time, and since you have the balance transferred from one account to another, your interest might start with that. The reason why you are not given a bigger interest on a new credit card is that you still need to loan the balance. Sometimes, the banks abruptly increase the interest, seeing the amount of money in your accounts. The grace period is usually 21 to 25 days, in which the cardholder might not have to pay interest, but that is if there is no balance available on your new card.

Steps to Follow for Successful Credit Card Balance Transfers:

Here are some steps you have to follow in order for a successful transfer:

1- Know your Credit Score

When you apply for a card, make sure that you have a 0% annual percentage rate (APR) because this is one of the reasons you are getting a new card in the first place. But understand that in order to enjoy the perks of this new card, or in some cases to get this new card, you must have a good credit score. A credit score is your evaluation of payments based on your loans, mortgages, other stuff, etc.

If you are able to maintain a good credit score and, in most cases, a score of 690, then you are very much illegible to get these perks. But here is a catch, make sure that you are not transferring a balance from one card to another card of the same organization/bank, and banks usually don’t allow such transfers. It is wise to select a bank that provides the best APR rates before you apply for another credit card. By knowing your credit score, you are better equipped to use options that are best suitable to you.

2- Know your New Credit Card

Your balance transfer card is significant for a balance transfer. You have to be aware of the options that are provided to you once you decide to issue a new balance transfer card. The annual fee, APR, and even the balance transfer fee are to be considered. There are several ways of having a balance transfer.

In some cases, people have to drag themselves to banks and sign written documents with many details for their balance transfer and sometimes provide a justification. In other cases, you can do it via phone or online. Whatever the process, you will have to give information about your debt. Usually, you are provided with a convenience check.

A convivence check is a blank check that your organization might offer you to pay balances to other organizations or make a new purchase. This sounds like a brilliant plan, but before you use it, make sure that you have read the terms and conditions for it. Also, ensure the interest you might have to pay on this blank check because it can cause you problems in the long run. Not so convenient, right?

3- Be Patient and Intelligent

The third step is to be a little patient with your transfer. Usually, it takes two weeks, but it can take more than that as well. Your credit, once transferred, will be ensured in the form of a deduction of the transfer fee. During the transfer process, keep your eyes open and keep paying your loan on your previous credit card; otherwise, you will be marked as past due, which can affect your credit scores. There are some organizations that will not provide you with the complete amount requested, some might pay a half or partial amount of the request, and in the worst-case scenario, your request can be rejected due to your past history. So, there is no transfer actually done without the amount when actually transferred to your account.

4- Pay Remaining Balance

The last step is to pay your balance. This has to be a swift process because this involves activity on both credit cards. When you have a new credit card balance, you can utilize the lowest interest for your benefit. Make sure that you clear your debts to the previous card. You can make the monthly payment and try to pay as much as possible, as it will save a lot of money.

Credit card balance transfers seem like an easy way out, but only if you know all the details. It is best to seek advice from smart analysts or legal advisors before making a big decision.