One of the top advantages of credit cards is that you can transfer balances between cards or get a new card specifically to transfer debt there. Though there are disadvantages to doing credit card balance transfers,there are many advantages to often make it a good option. Here are five benefits of balance transfers for credit cards.
Easy way to do debt consolidation
If you want to consolidate debts and get one payment,
a balance transfer is one of the easiest ways to do that. If you have enough room on an existing card, you can simply transfer a balance there; however, many people choose to open a new card to do a balance transfer. Either way you choose to do it, a balance transfer is much easier and faster than applying for a home equity loan or personal loan to consolidate debt.
Lower interest rate
One of the main reasons people do balance transfers is to get a
lower interest rate. Credit card companies often offer low teaser rates on balance transfers — including no interest — to entice people to either add to the balance on their cards or to open a new one. If you are responsible with your payments, you can use those low rates to pay down your debt faster and with less in the way of finance charges. You typically have to have a good credit score to get such offers.
Doing a balance transfer on a credit card is much more flexible than taking out a loan. With a loan, you have to make the same payment every month for a set period of time. When you do a balance transfer, you can pay as little as the minimum payment or as much as you want.
Lower fees than loans
Though balance transfers usually carry a fee, it often is lower than what you would pay to get a loan. Typical balance transfer fees are anywhere from 3 percent to five percent, with a minimum fee. If you are transferring a fairly small balance, say $1,000 or $2,000, the balance transfer fees are lower than the fees you would pay for a personal or home equity loan.
Simply your finances
Doing a credit card balance transfer can allow you to simplify your finances by eliminating multiple payments. If you get a high enough credit limit, you may be able to consolidate all your debt on one card, which will give you just one monthly payment to make. That reduces the chances of missing a payment, paying a penalty fee and hurting your credit card.
These are five benefits of a credit card balance transfer. There are several others that can make it a good deal.