Apply for a Credit Card in 20 Seconds
Wow! What a great option it is. Right?
Well, not so true. Even zero-percent balance transfer can sometimes put you in greater debt. Therefore, before you apply for a balance transfer credit card, it is important to go through its pros and cons. It will help you make the right move. So, here you go:
Here are some of the PROS of the Balance Transfer on Credit Cards:
Lower interest rate is probably the prime reason you are considering to move your balance. A lower interest rate will allow you to repair the dent in your finances. This can be explained as follows:
Your new credit will cost you a lower interest and no (or negligible) finance charges. Therefore, your monthly payment will be utilized in reducing your credit card balance and not for paying credit card interest rate.
Consolidation of credit card debt is one of the strongest points in favour of balance transfers on credit cards. Balance transfer credit cards allow you to transfer balances from multiple credit cards to a single card. Once you consolidate your debt to one card, you can focus on one payment and one due date. This can make it easier for you to manage your payments.
You are probably not happy with your current credit card and therefore decided to move to a new one. So, in case your current credit card offers a short grace period, charges high interest and rewards no or very little benefits, you can simply transfer your credit card balance to a better card and close your old credit card thereafter.
Unless you have a zero percent balance transfer credit card, you may have to pay a balance transfer fee to move your credit balance from one card to another. This fee usually ranges from 3 to 5% of the total amount that you transfer.
Balance transfer credit cards usually offer zero percent intro APR only for a pre-specified period of time which is generally six to twenty-one months. This means if you are transferring your balance to pay off debt, you have to be sure that you pay off all your debt before the promotional period ends so that you don’t have to pay for a higher interest.
When you are using a balance transfer to pay off your debt, make sure you do it wisely. This is because, in case you haven't addressed the root cause and do not have a plan, owning another credit card could easily put you in more debt.
When you are thinking of balance transfer you would probably research and apply for some good balance transfer credit cards. However, frequent applications of credit cards may affect your credit score. Since you are already in debt, you can’t afford any fall in your credit score.
Therefore, applying for multiple balance transfer cards is a bad idea unless you have a very good credit score.
The final decision is yours
Even though balance transfer on credit cards has a few drawbacks, it has also got numerous points in its favour. You just can’t reject balance transfer credit cards for a few cons. To make the final decision, you need to consider how balance transfer will affect your finances in the long term. Also, you need to evaluate whether the pros are outweighing the cons or the vice-versa? Your ultimate goal should be paying your debt as fast as possible so that you can start with your savings.