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In such a situation, balance transfer credit cards take the wheel. After you have understood how these cards work, they can prove to be a powerful financial tool, which allows you to pause the payment of interest temporarily. You can, hence, chip away at the principal balance more quickly.
You can easily find the meaning in the name. Balance transfer means taking the balances on one or more credit cards and transferring these balances to some other card, which has a lower rate of interest. As per a suitable situation, you must roll all the balance to a card that comes with a zero percent APR promotional period.
This leads to the elimination of interest for a certain duration, hence, providing you an opportunity of catching your breath. If everything goes as per the plan, you can clear off the balance before the interest comes in the scene.
For pulling off balance transfer, you can either opt for a new card with low or no interest rate or look into an existing card, which you have already cleared to check if there are any deals that could be considered.
Finding a zero percent rate of interest promotion on the existing cards is not uncommon. In case you have more than one credit card, there are chances that you will get such offers all the time.
If otherwise, do not refrain from reaching out to the card provider to check if they are offering any deals that you can grab. In case they do not have any such deals, or you are short of credit capacity on the cards you already own, you can shop online from the best balance transfer credit cards UAE.
As far as the promotional initial period is concerned, it may have varying offers, with the best terms and rates, generally obtained by those who have amazing credit. Those having a decent minimum credit rating can expect a considerable transfer period. Keep in mind that you must go through the fine print clearly, to make sure you are aware of the balance transfer fee charged if any.
First of all, turn to the existing cards, which have the capability of absorbing the new debt. Then check if there is any such offer available? If not, then the most suitable place for searching and comparing these offers is online. Here are a few factors that play a major role in the different types of deals you can be eligible for.
You would not qualify for most of the cards if the credit score is lower than a certain amount. The longest promotional periods that include zero percent interest are reserved for those who have a good credit rating.
Are you wondering, why? It is because low credit rating is a red flag to the banks that you could be a risky borrower.
Your credit rating does not just stand alone. You might have the most excellent credit rating in the world, the lenders; however, still wish to know whether you have the capability of paying off your bills or not, hence, you need to have a reliable monthly income.
People who are retired may have a harder time qualifying for the worthwhile transfer of balance because they may receive more funds from their retirement accounts as opposed to pensions or social security.
If in case you wish to save money and escape your debts fast, a balance transfer is a powerful weapon to be a part of your arsenal. However, this remains true only if you use it wisely. Here are things that you should be considering before you give it a shot.
This transfer strategy will fail if you do not get to the reason as to why you are stuck in the debt to start with. What are the types of purchases that are responsible for making up the bulk of the existing cards statements? If there are any living expenses, surprise pop-up bills, or splurges, it means the time has come for you to re-visit the budget so as to avoid falling prey to similar patterns again.
After completing the transfer, looking at zero dirhams’ balance on the previous cards could create temptation for you all.
In case you have not formed a plan, these transfers can be something that let you spend more money. Holding emergency savings in hand offers additional safety as you would not need a card for making the payment of your upcoming unexpected bill.
After your emergency fund and budget are well in shape, it is time for you to look around online for various offers related to transferring the balance. You would obviously look for the ones that have the lowest transfer charges and the longest zero percent introductory durations. However, there is a catch- this strategy makes sense only if you are capable of paying off the balance before the end of that period. After the period ends, you will have to bear a rate of interest on the balance outstanding.
Getting new balance transfer credit cards involve hard credit inquiry that will lead to a dip in your credit rating in the short-term. However, it can prove to be worthy if ultimately you are eliminating debt with high-interest faster.
If you would not have engaged in the strategy, your score would have improved much faster. But, this is a tiny step backward for a big leap forward, only if you have the discipline of doing it.
However, it is still suggested that you stay cautious with these transfers, in case you are planning to finance a huge purchase, like a car or mortgage, within the coming months. Based on your financial position, little fluctuations in your credit ratings can save you from getting the best rates of interest on these purchases.
In a Nutshell
Making use of a balance transfer credit card may be a good way of reducing the debt. Some of the card providers offer a low or zero percent promotional APR for a particular duration that lets you contribute more towards paying off your debt.
Look for a card to transfer your outstanding balance to. Then, identify the debts you wish to transfer. Make sure you use all the available funds for clearing your debts as soon as you can. After the end of this promotional period, you will have to bear a rate of interest on your debt again.