Balance Transfer Credit Cards
Credit cards represent a form of loaning facility. It allows you to access money, up to a particular limit, although you might not have earned it. Typically, this can lead to the accumulation of debt over time. In some cases, repayment of the interest associated with the debt can become daunting. In such cases, you can utilise balance transfer credit cards as a saving mechanism.
What Are Balance Transfer Credit Cards?
This involves the transfer of existing debt on a credit card to another credit card. The only difference is that with this transfer, you enjoy a lower interest rate on the debt. And in some cases, you can enjoy a total waiver of interest.
In turn, this allows you to complete your repayment faster. This is because your repayments no longer cater for the interest. Instead, it discharges the actual balance.
However, this saving option requires you to keep two things in mind.
First, it would be best that you avoid new purchases until you’ve discharged your earlier obligations. This is because you won’t get an interest free duration on new purchases. At least, not until you have completed your outstanding obligations.
Also, the rates associated with the balance transfer are time-limited. As such, you must have a clear plan of your repayment schedule. This way, you can complete repayment within the period.
How to Apply for A Balance Transfer Credit Card
The application process is similar to that of other credit cards. The only difference is that when you need to select your credit card type, you select the balance transfer option. Then, you also stipulate the credit amount you intend to transfer to the new card.
Eligibility for Balance Transfer Credit Cards
To be eligible for a balance transfer credit, you will need to satisfy the following requirements:
- You must be aged over 18
- You must be a citizen of Australia or a resident
- You must satisfy the necessary credit or income requirement
- You must be eligible for a balance transfer credit card
- Some banks might require you to be a new customer
Frequently Asked Questions
You can transfer as much as 80 per cent of your new credit cards limit. In some other cases, you can get as much as 70 per cent and 100 per cent. Now, here is how it work.
If your outstanding balance is $4,000, your new credit card limit must be a minimum of $5,000. It is only then that you can transfer your outstanding to the balance transfer credit card.
The goal of the balance transfer credit card is to help you save on your interest obligation. Typically, this occurs by allowing you to avoid your interest rates. However, remember that if you spend unwisely with the new card. Then, you fail to complete the repayment within the interest-free period; you could get high revert fees and rate.
A balance transfer credit card does not provide a lower or free interest rate on your regular spending. In fact, as soon as you complete the repayment of the outstanding, your account reverts to the standard interest rate. As such, you are only eligible for the standard interest-free days, typically between 44 and 55 days.