What is a balance transfer?

A balance transfer is essentially a way to consolidate your credit card debt. How? When you apply for a balance transfer, you transfer all or part of your credit card debt from one or more banks and move it all to one single account.

The benefit of this is usually to receive a lower interest rate and to save on your monthly repayments. 

Sounds good right? Let’s find out a little more.

Why consolidate your debt?

Depending on the amount you owe and the interest rate on your current credit card, monthly repayments can include significant levels of interest. This means your credit card debt can quickly grow and start to look a little scary.

That’s where balance transfers can help.

The biggest perk of a balance transfer is that most will offer a special low interest rate or an interest free period, for a certain length of time. That means you have extra time to save and pay off your debt.

What to look out for?

Every time you apply for a balance transfer, it’s added to your credit score. So make sure you ask questions before you apply, such as:

• How much can you transfer?
• How long is the transfer for?
• How many interest free days are on the new credit card?
• Are there any annual fees?

If you have asked yourself these questions, you can feel confident that your balance transfer decision will suit you and your finances.

Make the most of your balance transfer

Once you complete your balance transfer, the first thing you should do is put the end date of the low or interest free period in your calendar. From there, work backwards so you can create some goals and find out how much you will need to save a month to take advantage of the balance transfers interest rate.

If you can, cancel your old credit card too so you’re not also accumulating new credit card debt at the same time.

So, does a balance transfer sounds like it might suit you?

If you ask the right questions and understand the details, you can ensure this credit card switch will work for you.