Finances

What is a balance transfer credit card: is it a good idea?

Are you looking for a way to reduce your credit card debt? You may want to consider a balance transfer credit card. This product allows you to move your outstanding balance from one card to another, typically with a lower interest rate. Keep reading if you want to learn more!

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A guide to understanding balance transfer credit cards

three credit cards
What is a balance transfer credit card? Source: Adobe Stock.

Do you know what is a balance transfer credit card? If you’re like most people, you have at least one credit card. And chances are, you’ve also experienced the hefty interest rates that come with carrying a balance on it.

But what if there was a way to avoid those high-interest rates? Believe it or not, there is: balance transfer credit cards! These products let you move your existing credit card balance over to a new one with a lower interest rate. This can save you a lot of money in the long run and help you pay off your debt faster.

If you’re struggling with overwhelming debt and are looking for a way out, getting a balance transfer card might be the solution. However, it’s important to do your research before choosing one, as not all cards offer the same terms and conditions.

This article will explain all you need to know about balance transfer credit cards. We’ll outline the pros and cons of getting one and help you decide if this is the best route to put an end to your financial troubles. So, keep reading to learn more!

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What is a balance transfer credit card?

credit cards
What are the pros and cons of a balance transfer card? Source: Adobe Stock.

A balance transfer credit card might be the ticket to getting your finances back on track. This card type allows you to move your outstanding balance with a lower interest rate from one card to another. So, if you’re struggling to make headway on your debt, this is a product that could help you get it paid off more quickly.

You might not think that credit card debt can significantly impact your life, but it can really cause some problems. Not only does it make it harder to save money, but it can also affect your credit score. Many banks and card companies offer new cardholders a 0% intro APR on balance transfers for a lengthy period. 

These cards offer a period where you don’t have to pay interest on your debt. That way, you don’t have to worry about the rates, and all the payments you make go directly into what you owe without accruing more interest.

But it’s essential to plan ahead, so you don’t end up with a high APR after the promotional period ends. A balance transfer card can be an effective tool for getting you back on your feet if used correctly. 

If you want to move your credit card balance to a new one, there are many things you need to consider first. So read on to learn more about the pros and cons of getting a balance transfer card and find out if this type of card is right for your financial needs.

Pros

  • Finding the right balance transfer credit card can save you thousands of dollars on interest rates depending on your existing debt. There are many card companies on the market that offer a 0% intro APR product for a limited period that can go up to 15 months. 
  • Without accruing more interest on your debt, you’ll be able to pay it off a lot quicker. That’s because all payments go directly towards the amount you owe instead of the crushing credit card rates. 
  • You can consolidate all your existing debt into one single card. If you have too many cards with outstanding balances, you can move them all into your new credit card and concentrate your efforts on paying just one bill. 
  • If you suffered credit score damage because of the money you owe, a balance transfer credit card could help you repair your rates. With timely payments and responsible use, your credit utilization decreases. Therefore, your credit score will most likely improve over time. 
  • Most balance transfer credit cards with a 0% introductory APR also provide many other perks. That means you can pay down your existing debt and still get sign-up bonuses, reward points, consumer protection, and more.  

Cons

  • Promotional APR intros always come to an end. Most card companies provide balance transfers from 12 to 15 months on their credit cards. If you have a good/excellent credit score, you might even find a credit card with a 0% intro APR for 21 billing cycles. However, once the grace period is over, you’ll have to deal with their regular APR on all remaining charges. 
  • A good portion of 0% intro APR credit cards for balance transfers is only available to people with a good or excellent credit score. If that’s not your case, you might have some trouble finding an appropriate product to shift your debt. 
  • You’ll only benefit from a balance transfer credit card if you have discipline. That means no overusing your new card and paying close attention to your spending habits while paying off your debt. A 0% APR product can instigate more expenses and give you a false sense of security. A balance transfer will only do you more harm in such a case.

Do balance transfers hurt your credit?

credit report
Can balance transfers hurt your credit score? Source: Adobe Stock.

A balance transfer can seem like a great option when you’re looking to get out of debt. You move your credit card debt to a new card with a lower interest rate, and you can save yourself some money on interest payments. But is there a downside to balance transfers? Can they actually hurt your credit score?

The answer is yes; balance transfers can hurt your credit score. But how much they will affect it depends on several factors, including how much debt you’re transferring and how long you take to pay it off.

However,  it will cause you more good than harm if done correctly. You must avoid accumulating more debt until all your old balances are paid off for that to happen. And for this process to work, you have to make sure you can afford to pay off the debt before the promotional period ends.

If you can’t commit to doing that, getting a balance transfer credit card won’t help you. In that case, you’ll be better off requesting a personal loan to pay down your original debts. 

But if you feel like you’re ready to take that step and fix your financial situation, we have the perfect card for you! Check the link below to learn the application process for the Chase Freedom Unlimited® card. This product offers a 0% intro APR for 15 months and is the ideal tool to get your finances back to its health!

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About the author  /  Aline Barbosa

Aline Barbosa is an editor, writer and learning-enthusiast. Passionate about music, books and human behavior. Curious about the unknown. Believer that learning is a life-long process.

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