If you have debt that has you drowning and high-interest rates breaking your back, making a balance transfer to your credit card could be the solution you’ve been looking for.
A balance transfer can be an excellent solution to high-interest rates and a brilliant way to get out of debt sooner. But doing it is not a simple process, so we decided to summarize and explain the process and its importance in your economy.
First… What is the purpose of a balance transfer?
When you make a balance transfer from a credit card, you are looking to take advantage of a significantly lower promotional rate or APR that gives you a certain advantage. This is to reduce your interest amounts and get out of your card debt.
Ideally, the balance transfer should be executed to a card with a 0% promotional rate fee percentage. Take advantage of the limited time of this promotion to pay off existing debt on one of your cards.
Step by step to perform a balance transfer
A credit card balance transfer cannot be done blindly or mindlessly. It takes some knowledge so you don’t end up drowning in even more debt. That’s why we’ve prepared a step-by-step guide on how to do it successfully.
Know the process and your debt
To complete this process, you must be sure it is your best option to get out of debt. A balance transfer card will benefit you in cases where you have high fees and insufficient time to pay them.
At the same time, you will not be able to transfer a debt higher than your credit limit. Your objective, in any case, will always be that the card to which you are transferring the debt has a lower and more comfortable commission percentage than the previous one.
Consider your credit history
This strategy is usually made easier for people with a positive credit history because of the high possibility that you will get a card option suitable for the payment time that works for you and the ideal zero interest rate.
Although it is not a mandatory requirement, a high credit rating will facilitate the process of getting out of debt.
Get the offer that fits you best
Once you know your payment possibilities and your debt, it’s time to choose the ideal offer to transfer the balance. With a little luck, you will have enough options to choose the one that best suits your financial possibilities.
Among the factors to consider for this step are the length of the APR promotional period and the fees you will be charged for balance transfers.
Apply for the card that works best for you
You can apply for the card through your preferred bank’s website in a few minutes. The process to apply for this type of card is the same as applying for a regular credit card.
You will need to provide the bank with basic information about yourself, such as your social security number, address, contact information, and monthly income. This, along with your credit balance, should make you eligible for the card.
One point to highlight is that you should read the terms and conditions to ensure you don’t miss any card details. This is because you will verify again if the transfer fees and payment periods are adequate for you.
Contact the new card company to make the transfer
This is a simple process and will depend on the bank from which you ordered the new card. In most cases, you can make this transfer online or over the phone, which makes the system even easier.
The cumbersome part of this step is that, in certain cases, banks will have a daily balance limit for transfers. So, you will have to execute several transfers until the balance transaction is completed.
Therefore, you will have to continue paying the fees on your old card until the bank notifies you that the balance transfer process is complete.
Start your payment plan to pay off the debt
Once the transaction is complete, you will start paying off the debt by paying your new credit card fees. On paper, the debt should be paid off before the 0% interest period expires. Therefore, keeping up with the payments on the established dates is crucial to keep the debt from growing.
Details to consider
When carrying out this process, there are a series of points you cannot overlook if you do not want to worsen your financial situation or your credit history to be affected for the worse.
It is not only possible to carry out this process with credit card debts
Some banks offer the possibility of canceling any high-interest debt with a transferable balance card. Car payments, house payments, and student loans can all be rooted in the card. It all depends on the lender and the card company.
Just as it can improve your credit history, it can also affect it.
Making payments on time or not can either benefit or hurt your lifetime credit history. As long as you make your monthly payments on the right date to get out of debt, you can improve your credit history by lowering your credit usage.
Be aware of fees
Depending on the bank, balance transfer fees can range from 3% to 5%. Considering that, in most cases, you will have to make several transfers, this is a point to take into account when you think about making a balance transaction.
The 0% period does not last forever
You should organize your payment plan, bearing in mind that, depending on the bank, the 0% interest benefit period can last from 12 to 21 months.
Frankel, Robin Saks. “How To Do A Balance Transfer In 8 Steps – Forbes Advisor.” Forbes Advisor, https://www.forbes.com/advisor/credit-cards/how-to-do-a-balance-transfer/.