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Research: Types of balance transfers and their benefits - Credit-Land.com

A balance transfer refers to transferring the balance amount or debt from credit card of one company to another. A credit card balance transfers allow the card holders to pay their outstanding debts much faster and with a low rate of interest. The card holders are also allowed to consolidate their card debts.

All balance transfers are not the same. The terms and procedures may vary according to the lender and credit card companies authorising the transfer. Overall, balance transfer can be classified into following categories.

• Lifetime balance transfers

Lifetime balance transfer of credit cards is charged with the transfer rate ranging from minimum of 4% to maximum of 9% interest for the entire credit card amount being transferred. This type of transfer is ideal for card holders with substantial amount of debts as well as for those who do not foresee the payment of their debts in the future. The rate of transfer on these cards is typically higher as compared to the other type of card transfer rates offered for a limited period of time. Lifetime balance transfers are not offered by many lenders and as a result they are offered with an annual fee.

• Extended period balance transfer

Extended period balance transfer of credit cards are offered with lower rate of interest ranging from minimum rate of 1% to maximum rate of 5%. These minimized rates are offered commencing from nine months to two years. These transfers are well suited for credit card with nominal or sizeable debt. However, these transfers are not offered with zero rate interest, but still the rates are substantially lower than other balance transfers.

• Fixed period balance transfer

These transfers are offered with appealing rate of interest, but for a limited time. The card transfers are also facilitated with zero interest rate. This type of balance transfer is mostly preferred in the market and best suited for the credit card holders, who are looking for a solution to get rid of the debts quickly.

Benefits of balance transfer

• Reduced rate of interest

The main benefit given by credit card balance transfer is the lower rate of interest offered by few credit card companies. Reduced rate of interest facilitates reduced monthly instalments, which enables the card holder to settle the debt quickly. But the reduced rates are offered for a fixed period of time ranging from six months to a maximum of eighteen months. A few credit card companies offer the balance transfer at zero rate of interest as an introductory offer. Hence, it is recommended to the card holder to settle the entire amount due before the expiry of the introductory rate offered or reduced rate of interest.

• Improving the credit rating and credit report

Holding more number of credit cards with heavy outstanding balance may have an adverse effect on the credit rating of an individual. Balance transfer allows the card holders to improve the credit rating or credit history by combining debts multiple cards into one or two credit cards, thereby enabling the card holders to close redundant cards.

Disclaimer: This editorial content is not provided or commissioned by the banks or credit card issuer(s). Opinions expressed here are the author's alone, not those of the banks or credit card issuer(s), and have not been reviewed, approved or otherwise endorsed by the banks or credit card issuer(s). Reasonable efforts are made to present accurate info, however all info is presented without warranty. Consult with the issuing bank of the card or account for terms & conditions.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are accurate as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.