Save Thousands on Credit Card Debt with Balance Transfers

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Using the balance transfer facility that many banks provide, we can save thousands of dollars and it’s a fact. Many people just don’t want to go for it as they have some kind of fear or procrastinate to believe how this is even possible with such head over heels in debts situation.  The below step by step explanation will guide you through the ways you can save thousands on your credit card debts and hopefully answer your questions.

What is a balance transfer?

A balance transfer is a process through which you can transfer all your credit card debts to one credit card (known as balance transfer card) just like transferring your debts from one bank account to another. This way you have to pay one debt (combination of all your previous debts) only with one monthly payment with lower APR rate. To avail this opportunity balance transfer card must be affiliated with a different bank account because usually balance transfers between accounts of the same bank are not allowed.

How is this going to save money?

How do credit transfers help me? I have to pay down the debt anyway you might be asking. Yes, you are right in that, the debt has to be paid off but the main source of the saving is the lower interest rate provided by the balance transfer cards. Whereas in regular credit cards the APR can be up to 20% or even more, in balance transfer card the interest rate varies between 0 to 5%! Now it seems interesting, I guess it snaps you to attention.  However, remember that this lower interest rate is available for a certain period of time (maybe 6 months, 12, 24 or more).

Could you please give an example and elaborate?

Certainly! Let’s assume you have a good credit score (680-749), the amount of your credit card debt is $12000, you pay $350 per month and the interest rate (APR) is 18%. To clear your debt it will take you 49 months and the total interest you will need to pay in is $4976.52; just use any financial calculator online to figure out the result.

Let’s come to balance transfer cards now. It is possible that you save up to $3440 and get rid of the debt once and for all in 36 months if you have good credit score and the balance transfer card offers you 3.5% interest rate for over a period of 36 months. Check magnifymoney.com.

Do I need to be careful before balance transfer?

That’s a really good question.  These financial activities could be very tricky. If you are not careful enough you might end up losing money. Before balance transfer, you should know-

  1. You need to have a good credit score which starts with 680 to avail the balance transfer opportunity. A good score means you are a dependable and low-risk customer. So the bank would not hesitate much to take the risk of giving you a credit card.
  2. The interest rate is very low compared to other credit cards but only for a certain period of time. After that, the bank might charge higher interest. Don’t fail to pay off within the designated period, otherwise you might end up paying more than you had to before you made the balance transfers.
  3. Unless bank offers a zero or low-interest rate for purchase, don’t even think to use this credit card. It will cost you highly.
  4. There is transfer fee most of the time. Nothing to be worried about, it’s one time and only about 3/4% of the transferred amount.  During the transfer, it will be added to your balance.

There are always opportunities to take the advantage of financial systems. It’s just you have to use your wisdom and be calculative. A balance transfer is a great way of saving money and getting rid of debts.  Assess your financial condition, be cautious and read all the terms and conditions carefully, take help from experts if necessary and take the right decision.

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