Balance transfer credit cards allow you to move an existing debt on a credit card to a new card. Since some credit cards have a low interest rate, this can work to your advantage. For example, you could go from the average interest rate of 19.99% to as low as 0% during a promotion.
When used responsibly, a balance transfer is an easy way to help you reduce your debt. However, this is a one-time deal since balance transfers can usually only be done at the time of application or within 90 days of account opening.
If the card you’re applying for has a balance transfer promotion, it’ll only be good for a limited time before rates go back up. That said, the interest rate charged will usually still be lower than traditional cards, so making the switch can be worth it.
All balance transfer credit cards can help you reduce your debt. That said, they also have some minor differences that are worth looking at. Consider the following when choosing a balance transfer credit card.
Although there may be fees associated with a balance transfer, the amount you save on interest could be worth it. Some providers will even let you transfer someone else’s debt to your card, but then you’d be responsible for repayments. Don’t think too much about any additional benefits, as your goal should be reducing debt.
Applying for a balance transfer credit card is easy since you can do it online or at your financial institution. Since many providers require you to do the balance transfer at the time of application, you’ll want to have your other account numbers and balances handy.
Balance transfer credit cards are traditional cards, so you’ll likely need to meet the following conditions to be approved:
Once approved, you’ll already have a balance owing on your card if you performed a balance transfer. Be sure not to miss any payments, or your interest rate may immediately default to the standard purchase rate.
Getting a balance transfer credit card can be an excellent option to reduce debt since the interest rates offered can be relatively low. Use this to your advantage and pay down your debt so you can take control of your finances.
Barry Choi is a personal finance and travel expert. His website moneywehave.com is one of Canada's most trusted sites when it comes to all things related to money and travel. You can reach him on Twitter: @barrychoi.