Want to save hundreds, maybe even thousands of dollars in credit card fees? Well, I have a secret weapon for you that is used by smart credit card owners everywhere. That secret weapon is balance transfers!
A balance transfer is when you transfer an unpaid balance from one credit card to a second credit card to benefit from the lower interest rate on the second card.
Sounds amazing right?
Well, before you start using balance transfers there are a few things you should know.
You’ll likely pay a fee.
As the saying goes: Every rose has its thorn. And that saying often holds true for balance transfers. There are some circumstances where you’ll be offered a balance transfer for free (mainly when you are approved for a new credit card), but most of the time a fee is applied to the amount of the balance you transfer. These fees usually range between two and five percent of the total balance transferred.
But with that being said, that doesn’t take away the fact that…
You can save a lot of money.
This is the major benefit of balance transfers; the savings can pile up quickly! Even if you pay a 2% fee to transfer the balance, if your interest rate drops from 15% to 5% due to the transfer you are saving a significant amount of money in credit card fees.
Which brings me to my third point…
Not everyone qualifies.
When it comes to balance transfers, one of the drawbacks is that not everyone qualifies. Usually, banks and credit card companies only approve balance transfers for people with good credit scores. If your credit score is below 700, you’ll likely have a hard time getting approved for a balance transfer.
You can get out of debt faster.
Lower interest rates mean that paying your credit card balance in full will happen a lot faster than it would with a higher interest rate. That’s a huge win in the money management department.
Combining accounts via a balance transfer is a great move if you can get a lower interest rate. There are not many drawbacks to using this tool to lower your level of debt. That’s why the balance transfer is a secret weapon of smart credit card owners everywhere!