You may have just returned from a long vacation and now have an even bigger credit card debt. Transferring credit card balances has many advantages, but it is not without negative implications as well. Here are a few ways that transferring credit card balances is a good idea.
When you transfer the balance from one credit to another, the only real reason to do it is if the second credit card offers you a lower rate of interest. You can save on all that potential interest money, which you otherwise would have paid the credit card #1 – only if you manage to pay back all that debt over time. If you do not do that, then interest on credit card #2 can quickly add up.
If you have multiple cards and have lost track of each of their due dates and billing dates, then transferring all the balances to one card will simplify your financial life.
Apart from balances from other credit cards, there are credit cards that allow the option of transferring other loans from the bank, such as your car loan or a personal loan.
Transfer fees will always apply, and there is no cap on the fees. Therefore, the more you transfer, the greater will be the fees. It only makes sense to transfer if the total interest accrued would exceed the total transfer fees. Calculate everything before you transfer the balance.
To sum up, you can avail yourself of the advantages of transferring a credit balance only if:
- Interest rates are zero or low on the new card.
- Consolidating all your debt into one card will simplify your life.
- Pay the transferred amount on time to avoid additional interest.
- Calculate total transfer fees and total interest savings to make a sound decision.