The content is accurate at the time of publication and is subject to change.
Balance Transfers are typically moving the balance from an account of one credit card to another. This is normally done into an account with favorable interest rate. The account from which the balance is transferred could be the same type or different from the type of account into which the balance is transferred. These accounts include Bank savings account, Bank checking accounts, credit card accounts, and trading accounts at any financial institution.
Most of the banks try to persuade prospective clients to switch accounts by providing special offers for lower rate transfers. Though these might be attractive, normally these are valid only for a limited period. However, take a look at all the deals offered in the market to have a fair knowledge of your deal. The basic need for a balance transfer is to have a remaining balance after all your payments for the month.
Nevertheless, you must be aware of what to look for in balance transfers. When it comes to the plus points, you must look for the interest rate that is offered, if you can benefit zero interest rate for the set period, the duration or number of months the offer is provided, and also about the possible loan and overdrafts from which the transfer can happen. To discuss the negative issues, you must be aware of the hidden charges for these transfers, validity period of the offer, if there is any service charge from the bank, and the cut-off time for the offer of the transfer.
There are different types of balance transfers: Lifetime transfers, fixed period transfers, and extended period transfers. Yet, all the balance transfer cards are not the same. The terms and conversion rate would vary depending upon the lender and the company of credit cards.
The lifetime transfer credit cards have a rate of 4% to 9% for the entire amount of transfer. If you have a huge amount of debts, this is ideal but the transfer rate is quite high and this offer is quite rare and comes with an annual fee. The rate of interest for an extended period transfer is comparatively low ranging from 1% to 5% for a period of approximately 9 months to 2 years. If you have a nominal debt, this is ideal for you but you cannot expect zero rate of interest. The fixed period transfer is offered for a very limited period with 0% to 7% of rate of interest. This is one of the most sought after and is the best for you to clear your debts soon.
Reduced interest rates and improving credit report as well as rating of credit card are the main benefits of balance transfer. You must be aware of the number of cards you hold and if any huge balance, as this may have adverse effect on your credit card rating. You may combine debts of multiple credit cards to a single card or two.
Make the best choice, maintain regular payments and opt for a direct debit to be on the safer side.