How Do I Get A Balance Transfer Credit Card
Before applying for a balance transfer credit card, check your credit reports and and gather the personal information youll need to provide, including your income and Social Security number.
Next, compare the fees, APRs, perks and credit requirements of different balance transfer credit cards. Our list of the best balance transfer cards is a good place to start there, you can compare offers and apply for a card that fits your needs.
Lastly, if you are curious about how your numbers work in this kind of scenario, test it out using Bankrates credit card balance transfer calculator.
Your Credit Limit Will Probably Be Relatively Low
If youre not already convinced not to use a balance transfer card for anything but credit card debt, consider this: Your balance transfer card will probably have a thats much lower than what you owe on your car, student or home equity loan. In fact, Equifax reported the average limit for a credit card opened in January 2021 was just $4,067.
Does A Balance Transfer Affect Credit Score
Every new line of credit can ding your score. So if youre applying for a new balance transfer card, it can have an impact on your credit score. Your score may also be impacted by a balance transfer if the amount youre transferring to a new card is at or close to the total allowable credit limit on the new card. Thats because your debt-to-available credit ratio makes up a significant role in determining your overall score.
But, if you have a plan to use a balance transfer to help you pay down your debt more quickly than you could without doing a transfer, in the long run, your overall debt load will be lower and that will in turn have a positive impact on your credit score.
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What To Look For In A Balance Transfer Card
Balance transfers can save money. Say you have a $5,000 balance on a credit card with a 20% annual percentage rate . At that rate, carrying that balance and paying $250 a month would require 24 months to pay off and cost $1,134 in interest. After securing a 12-month 0% balance transfer on a new credit card and moving the $5,000 balance, the cardholder gets a year to pay it off with no interest and just a fee to transfer the balance.
But details and costs associated with these transfers are numerous. After the transfer, for example, you still have to make the minimum monthly payment on the card before the due date to keep that 0% rate. And pay attention to the interest rate. Does the new card have a regular interest rate thats higher than the interest the balance incurs on your current card?
Similarly, a default under any of the rules of the cardholder agreementsuch as making payments late, exceeding the credit limit, or bouncing a checkcan make the interest jump to a penalty rate as high as 29.99%. The 0% rate is usually valid for 12 or 18 months, sometimes more. Can you pay off the transferred balance during that period? If not, what interest rate kicks in afterward?
The Main Differences Between Balance Transfers And Personal Loans
There are two main options for debt consolidation: balance transfers and personal loans. Both have their pros and cons, but which one is right for you will depend on your individual circumstances.
Balance transfers involve transferring the balance of your credit card to a new card with a lower interest rate. This can help you save money on interest and pay off your debt faster. However, balance transfers usually come with a fee, and if youre not careful, you could end up paying more in interest than you would have with a personal loan.
Personal loans, on the other hand, involve borrowing a fixed amount of money from a lender and repaying it over a set period of time, usually at a lower interest rate than your credit card.
Personal loans can also be used to consolidate multiple debts into one monthly payment, which can make it easier to manage your finances. However, personal loans typically have higher interest rates than balance transfers, so youll need to be sure you can afford the monthly payments before you take one out.
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Which Credit Cards Allow A Personal Loan Balance Transfer
There are a few credit card providers in Australia that give you a way to balance transfer personal loan debt to a credit card, including Citi, Coles, Kogan Money, Qantas Money and Virgin Money.
Most other credit cards that offer 0% balance transfer rates only let you move debts from other Australian credit cards, store cards or charge cards from other issuers.
Do Balance Transfers Hurt Your Credit Score
When you get a balance transfer card, you can expect to see your score dip at first, since applying for a new card generates a hard inquiry on your credit score. However, with good behavior over time, you can expect to see your score increase thanks to more available credit and a decreasing balance .
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A Look At Credit Card Debt Consolidation Methodsand Some Potential Benefits And Drawbacks Of Those Options
Managing debt can be stressful at any time. This is particularly true when you fall behind on bills, especially if youâre watching interest charges build up every month. If you find yourself struggling, consolidating your credit card debt could be one way to simplify and lower your payments.
But thereâs plenty to think about as you decide whether consolidation is right for you. Keep reading to learn a few things to consider and a few methods to consolidate credit card debt, including potential risks and benefits.
- Common methods to consolidate credit card debt include balance transfers, personal loans, debt management plans and home equity loans or home equity lines of credit.
- Be sure to carefully consider the details of any consolidation loan.
- While credit consolidation may be a helpful debt management option for some, it isnât right for everyone.
What Are The Benefits Of Balance Transferring Your Personal Loan To A Credit Card
The main benefit of using a balance transfer credit card is a chance to save money on interest charges by moving your debt to a low or zero per cent introductory interest rate. This could help you pay off your personal loan faster, as more of your repayments are applied towards reducing the principal due to lowered or no interest charges during the introductory period.
Another potential benefit of using a balance transfer credit card could be consolidating several small debts on a single, low-interest rate card with a single monthly repayment. However, if you are not careful enough, a balance transfer card could be a trap leading to a debt spiral.
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You Would Prefer A Structured Pay
You will probably have a fixed monthly payment that does not change for the duration of your personal loan. Stability and predictably, in a nutshell.
A balance transfer credit card will often have a variable interest rate. Sure, the rate could go down with a variable rate, but it could also go up which will cost you more in the long run.
Get a rough estimate on how much you could save with our personal loan calculator, and see if a personal loan might be the best fit for you.
Refinancing With A Balance Transfer Credit Card Vs A Personal Loan
Struggling to decide between refinancing your credit card with a balance transfer or a personal loan? Getting familiar with the two is a good place to start. To begin, we recommend reading about and refinancing with a personal loan, so you have an idea of what were talking about.
Once you know what youre choosing between, you can move forward with your decision and use our tips to make sure youre making the right one.
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What Happens If My Account Has A Zero Balance Following A Credit Card Refund
In the event of a zero credit card balance, several things can occur after a refund, like:
- If you pay your credit card bill down to $0 prior to a refund, a negative balance appears on your account. When you make other purchases in the future, that negative balance will be applied to them first, until youve used all the money.
- If you have a large negative balance on a credit card that you dont use very often, your credit card company might automatically send the amount to you by cheque. Otherwise, you may have to contact them directly to request this service.
- If you have any unpaid purchases on your credit card account, the refund should lower your balance after its been issued.
Alternatives To A Balance Transfer Card
If you worry that you wont be approved for a balance transfer card or if you dont want to open a new credit card applying for a debt consolidation loan might be a better option than a balance transfer. Such loans are offered by banks, credit unions and online lenders. Simply put, when youre approved for a debt consolidation loan, you use that loan to pay off your credit card debt . The lender might disburse funds to you to pay off your card debt or pay your credit card issuer directly.
A benefit of a debt consolidation loan is that if youre juggling multiple credit card payments, consolidating everything into one loan payment can simplify your finances. Plus, a debt consolidation loan has a set monthly payment and a set date by which youll have paid the total amount in full, which can be helpful if you need a more structured payment schedule than what a credit card offers.
One downside to a debt consolidation loan is that youll still have to pay interest, whereas with a balance transfer card, you typically get a period where no interest accrues. However, depending on the APR of your loan, you might still end up saving money compared with carrying a balance on a high-APR credit card.
The average APR for debt consolidation loans is approximately 9.81% for those with credit scores above 720 and as high as 23.54% for those with credit scores in the 660 to 679 range, according to 2022 LendingTree data.Receive offers from lenders.
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Transfers To Existing Cards
Balance transfers can also be done with an existing card, especially if the issuer is running a special promotion. This can be tricky, however, if the existing card already has a balance that the transfer will only increase.
Suppose a cardholder owes $2,000 on a card with a 15% APR before they transfer a balance of $1,000 from a second card. The balance transfer rate offered is 0% for six months. The cardholder pays off $1,000 in six months, but because the 15% portion of the credit card debt is paid first, the 15% APR rate for six months applies to the $2,000 that was untouched by payments. Meanwhile, the card the $1,000 was transferred from has an APR rate of 12%, representing a loss of 3%.
Also consider what adding a big sum to a card will do to the that is, the percentage of available credit thats been usedwhich is a key component of your credit score. Say you have a card with a $10,000 limit and a $1,250 balance. You are using 12.5% of your credit limit. If you then transfer $5,000, creating a total balance of $6,250, youre now using 62.5% of your credit limit. This increase in a balance on one card could hurt your credit score and ultimately cause the interest rate to rise on this and other cards. This may, of course, be mitigated by the $5,000 lower balance on the higher-interest card from which the transfer was made.
Pros Of Debt Consolidation Loans
Loans can be large enough to consolidate multiple debts, including credit cards, other personal loans or medical bills.
Annual percentage rates may be low for those with good to excellent credit.
Some lenders will directly pay off your credit card, saving you that step.
Fixed rates and monthly payments are easier to budget and give you a payoff date.
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You May Earn A Lower Interest Rate
You could pay 20% APR or more if you carry a credit card balance, although borrowers with excellent credit could pay roughly 12% to 17%, depending on the type of card they own.
Personal loans, on the other hand, charge an average interest rate of less than 10%. The best personal loans are even cheaper than that if you have a high credit score. That means you could cut your total interest payment in half and even pay off your debt sooner since youâll be paying less in interest.
How To Apply For A Balance Transfer Credit Card
Make no mistake: There are a lot of balance transfer credit cards out there. So how do you pick one? Research plays a big role, but ultimately youll want to find the card thats best for you. If youre looking for a place to get started, you can compare offers for balance transfer credit cards on Credit Karma.
Checked your credit scores and ready to apply? Go ahead! Typically, youll be asked to provide your current credit account information to the credit card company. If youre approved, you may be able to transfer all or a portion of your existing debt, depending on the credit limit youre offered.
If youre not approved for a credit limit that allows you to transfer all your debt, weigh the costs to see if its actually worth it.
For example: If youre transferring $4,500 but were only approved for a $3,000 credit limit, youd still have to keep at least $1,500 on your old account balance. The consolidation/simplification benefit would be lost, but you may still be able to save some money on interest.
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What Are Tricks To Paying Off Credit Cards
Tricks to paying off credit cards include increasing your income with a side-hustle or part-time job, using one of the above debt management strategies, lowering your monthly spending, and switching to only using cash in order to better manage your finances.
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Balance Transfer Personal Loans
Similar to balance transfer cards, a balance transfer loan also allows you to pay down high-interest debt and into one low monthly payment. But instead of using more revolving debt to accomplish this, you get a personal loan with a fixed term and a fixed rate. This means the APR you agree to when you apply is the same APR you will keep for the duration of your loan and a far better option for those suffering a poor financial health period. Youll never get a surprise notification that your rates have increased. And from the minute you accept your offer, you will know the exact date your balance transfer loan will be paid off. Since a balance transfer loan is not revolving debt, youll be able to circle the payoff date in your calendar.
Another benefit to balance transfer loans is they have no balance transfer fees. Although origination fees of 1-6% of the loan amount are typical, interest rates are often much lower than those on credit cards.
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How Do Balance Transfers Work
Balance transfers let you use one credit card account to pay off another card or a loan . Card companies sometimes offer limited-time, low- or no-interest balance transfers to entice you to sign up for a new card. Not every card company lets you use an introductory balance transfer offer to pay off a personal loan, so it’s worth asking about this before you open an account. Here are a few additional questions to ask about your introductory balance transfer offer:
- When do you need to activate? You may need to complete your balance transfer within 60 or 120 days to get the low introductory annual percentage rate .
- How long is your introductory APR in effect? Typical introductory periods last 12, 15 or 18 months.
- What is the regular APR on balance transfers? Once your introductory period is over, your APR will convert, often to a rate that’s similar to or the same as your card’s regular APR for purchases.
- What is the balance transfer fee? Your balance transfer fee may be lower during the introductory period. Typical balance transfer fees range from 3% to 5% with a minimum fee of $5.