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What is a balance transfer card?

On Behalf of | May 8, 2020 | Firm News

There are many ways to manage your credit card debt. Many people spend a lot of time coming up with a strategy that works for them: popular strategies include the snowball method and the avalanche method.

However, there is another option. Many people choose to apply for a balance transfer credit card to help them deal with credit card debt. According to NerdWallet, a balance transfer credit card allows you to move high interest credit card debt from one card to another with a lower interest rate.

Why would I want to do this?

Using a balance transfer credit card does not automatically get rid of the debt, but it can provide a more favorable environment for paying it off. For instance, many balance transfer credit cards have 0% APR. If you move your debt from a card with high APR to one with 0%, you will end up paying much less in interest. Depending on the nature of your debt, this could save you thousands of dollars.

What are the negatives?

The biggest negative to a balance transfer credit card is that the ones with the best interest rates and perks tend to only be available to individuals with good credit. So if you happen to have poor credit, this may not be an option for you.

Balance transfers also usually have some amount of fee attached to them. For instance, the transfer fee is generally between 3% and 5% of the total debt. Depending on the balance transfer card’s limits and the size of your debt, you may not be able to transfer all of your debt onto the balance transfer card.