A Balance transfer credit card makes it make affordable for new cardholders to clear previous credit card debts. Like any other credit card, you can use a balance transfer credit card to pay for everyday purchases.
Some balance transfer credit cards come with a promotional period of 0% balance interest for transfer. During this period, new cardholders can transfer balances from an older credit card to their new one without paying interest on the debt transferred.
After you issue a credit transfer, the issuer of your new card sends money to the previous one to clear off your debt. You will then owe the new card issuer money. This process takes about 3-4 weeks.
Why use a balance transfer card
You should consider a balance transfer if the card you’re moving to has a lower interest rate than your current card. That way, the cost of eliminating your debt becomes cheaper. A balance transfer card with a period of 0% balance transfer is beneficial since you can use it to eliminate your credit card debt quickly.
The length of the promotion differs from card to card. It can be as short as six months which is the legal minimum, and as long as 24 months. Once the promotion ends, you will have to pay regular interest rates on your remaining debt.
Before transferring debt, your new credit card often requires you to pay a balance transfer fee. The fee will be a certain percentage ( usually 3-5%) of the debt. While the charge might seem high, it is generally less than what you’d pay if you had to pay interest on your debt.
Doing multiple balance transfers
Some people opt to do many balance transfers, especially when they can’t clear their debt within the promotional period. Nothing is preventing you from doing this.
The card issuer can limit the amount of balance transferred to your new card. If it does not, you can issue a balance transfer up to your credit card limit.
It is not advisable to close your previous account after a balance transfer unless It comes with an annual fee. Having both accounts open will lower your credit utilisation ratio. If you decide to cancel it, you won’t get the perks of a low credit utilisation rate.
