When you make a balance transfer, you are paying off the balance on one or more existing cards or loans by transferring the balance to a new credit card account. You cannot transfer more than the credit limit on the new card.
Why would anyone move their balance from one card to another?
The biggest reason that this sounds like such a good idea to people, is that they have the chance to move debt from a card with a high interest rate to a different credit card with a lower interest rate. When considering this method, it is important to know a few other things about balance transfers.
There are unique credit cards that have been made for the primary purpose of transferring a balance and consolidating debt on to one single credit card. They are known as balance transfer credit cards. They generally have lower interest rates, often 0% introductory periods, for a certain amount of months so that you can pay the debt back without gaining interest. The introductory period often lasts 9-18 months, but some may be even longer. You must generally have fairly good credit in order to use such cards.
Remember that transferring a balance is not the same thing as paying the debt off—that debt is still there and it must still be payed. Some people forget that making a balance transfer won’t necessarily solve all of their problems. At least if you have debt on a card with lower interest, as opposed to one with high interest, you won’t have to pay nearly as much money in interest fees to the lender.
This is the primary reason that balance transfers can be beneficial.
Transferring your balance on to a single card generally means that you are able to consolidate your debt. You will therefore not have to make multiple payments on different accounts, you will be able to make one single, larger payment. This can make things easier, simpler, and less difficult to keep track of. You can also transfer debt that it not necessarily credit card debt, such as other types of loans.
Beware of fees.
Often the balance transfer fee involved in the process could be as much as 3%-5% of transferred debt. There are some credit cards that have a 0% intro balance fee, but they generally do not retain this percent and expire after a certain period of time. Before you make this decision make sure that you will be saving enough money on the reduced interest rate to make the transfer balance fee worth it. Remember that the transfer rates do expire. While you may start out paying 0% interest, after a set amount of time that won’t be the case. Don’t make this decision unless you are sure you can make your payments in full and on time.
What Happens After You Apply for a Credit Card
Depending on who you are, those reviewing your application may need to collect more information about you before making a decision. You may also call the credit card company to check up on the status. In general you will receive a written response within a week of submitting your application.
Obviously you will find out if your application was rejected or approved. If you are denied, it is a good idea for you to do your best to understand the reason why. Often the company will tell you the reason, but if they don’t you can always call and ask. This will help you not to make the same mistake twice.
After you have been approved, you will receive your credit card in the mail. This will likely take a week or two. You may proceed by activating your credit card, usually by calling the number listed on the card. After you apply, and when you get approved, you will be told what your credit card limit is. This often varies depending on your application and after you are approved the credit card company will let you know.
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