A guidebook to credit card applications with balance transfers
These days, high credit card fees are becoming a significant burden to most people. The good news is that there is a way, which people can lower their interest payments by transferring their existing balance to another credit card.
There is no doubt that balance transfers are the most cost-effective and convenient ways of reducing credit card costs. Before making any credit card applications, it is imperative for applicants to understand all the terms and conditions of the new card. Doing this will increase their chances of maximizing their savings.
If you are unsure about switching to another credit card, you might want to ask your existing card provider about whether you can get a lower interest rate. You can simply tell them that you have found a better deal elsewhere and that you would have to transfer your balance if they can not provide you a lower interest rate. In any event, you should be ready to transfer your balance if your credit card company turns you down.
Balance Transfer Uses
There are many benefits which a balance transfer can provide a card holder. By transferring your existing balance to a credit card with low APR, you can reduce your interest rate and monthly fee repayments by a significant margin. It is also worth mentioning that credit card companies charge different interest rates on balance transfers and purchases.
0 percent for six to twelve months is the most common rate on the market. For instance, the Chase Ultimate Rewards MasterCard and Citi Platinum Select MasterCard charge 0 interest on balance transfer and purchases for the first 12 months. On the other hand, the Discover Platinum Card and the Hess Visa Chase drop their preliminary rate once eight and six months has elapsed, respectively.
Furthermore, there are some providers of credit cards with low APR who link their introductory annual percentage rate to billing trends. The GM Card and the Fifth Third Bank Cash Rewards MasterCard are good examples.
These low APR cards both charge 0 percent APR for the first six and four cycles, respectively. Another advantage of balance transfers is that it can give cardholders access to more perks.
For instance, by transferring their balance, card holders may be able to get credit cards with no annual fees, which also have a lengthier payment grace time scales and offer cash back on purchases. In fact, some of the best credit cards which offer perks like car rental insurance, money saving discounts and identity theft protection programs.
How to go about Transferring Balances
It is widely known that there is no single one of the best card providers who do not use balance transfers to attract a bigger pool of new customers. If you are considering transferring your balance on an existing card, there are three ways that you should be aware of.
The first way is simply by filling out the forms supplied by your new card provider who is offering the best credit card deal. Alternatively, you can contact your prospective credit card company and inform them that you want to transfer your balance over to them. They can then help you make the necessary arrangements for a balance transfer.
It is also possible to transfer balances by writing a balance transfer or a convenience check. The way this works is quite simple. All you have to do is write a check for the sum of the balance transfer and mail it to your existing credit card company. If you decide to take this route, be sure to find out if your check has an expiration date. If it does, then you need to make sure you use it before the deadline, otherwise you will be charged the regular interest rate set for your card.
It does not particularly matter which balance transfer method you use. But you should note that you can only transfer the same credit limit allowable under your existing card.
The Costs and Fees involved
The majority of banks consider balance transfers as cash advances. As such, they have similar transaction fees. If you are transferring your balance in response to one of the many balance transfer credit card offers, you will not be charged a fee.
However, for some of the best card providers like Citi Platinum Select and a number of other card providers, the transaction fee for balance transfers is 3 percent of the amount of each balance transfer, with a $5 minimum and $50 threshold. It is important to note that it might not be cost effective to transfer a small amount of funds because the transaction fees involved might surpass any potential savings.
Aside from standard transaction costs, most banks and card providers charge customers hidden fees that can come up as a complete surprise. Some of these fees include:
Late fees - There are some banks that wait a few days before imposing a late fee. The majority however, will impose fees within 24 hours of when the payment was due. Card companies will either charge you a flat sum such as a $10-15 fee. Or they would charge you a percentage ranging from 5 percent of the minimum outstanding repayment.
The best way to avoid late fees is to mail off your payment well before it is actually due. If you choose to pay your bill at the bank, you ought to always find out how long it normally takes for payments to be processed. This is important because on occasion payments made at a branch of ATM are not fully processed for a few days.
Over-credit-limit charges - if you go over your credit limit, the majority of banks will charge you a fee for this. You will incur this charge every time you go over your limit. This means that you can get several of these charges in a single billing period. Banks traditionally charge you between $10 and $15 for every time you surpass your credit limit. The fees you incur do not comprise of the interest rate charge that you will still need to pay.
Lost card replacement charges - You are likely to incur a charge if you lose your card more than once. The standard fee which most banks charge for this is usually $10-15.
Making your Payments
The moment card holders have made a transfer, they must remember to make complete and scheduled payments otherwise they will incur higher fees. As a rule, there is no period of grace for repaying balance transfers. This means that interest will accumulate spontaneously.
It is always crucial to understand that when making payments, the payments you make are usually allocated to lower/promotional balances before they are transferred to higher APRs. This implies that you will paying 0 percent balance transfers before you even have a chance of clearing up regular purchase balances.
The best credit card interest rate on such payments can be as high as 9 to 18 percent. As such, it is advisable for card holders to use a different card for regular purchases and to clear off the balance every month. Balance transfers are best kept restricted to a different card.
After the Promotional Period Elapses
Card holders always need to ensure that they keep close tabs on the promotional period so that they do not get caught out. This is because as soon as it expires, normal interest rates will take over. The standard variable APR for Citi Platinum purchases (8.99 percent) will be applied to all outstanding purchase and balance transfer sums.
In the same vein, the standard variable APR for cash advances (19.99 percent) will be applied to all outstanding cash advance sum. If you fail to meet the agreement on Citi Platinum's card terms, the company reserves the right to immediately raise the APR on all balances including all promotional balances to a variable default rate of 28.99 percent.
You should also bear in mind that your post-introductory APR will be determined by your credit history. Should this new rate be higher than the one of your old card, you could end up making a substantial loss. It goes without saying that you have yet again the option of transferring your balance to another card. But there is always a danger of falling in to a vicious cycle of balance transferring and this can sometimes backfire later on.