Credit cards are a means of electronic transfer that makes transactions easy. Usually, credit cards carry a balance that you need to pay back for the issuing authority. Some credit cards carry high-interest and are not easy to pay. But there is something called a balance transfer credit card that helps in repaying the money with ease.
If you haven’t heard of a balance transfer credit card, then read this article. Here the article talks about what is credit transfer, advantages and disadvantages of such cards.
What is a credit transfer?
Credit transfer is also known as credit card balance transfer. It is a type of facility that allows the transfer of balance from one credit card to another. This is usually done when the rate of interest of a credit card company is high. In that case, the outstanding balance of one card can be transferred to another.
Pros of Balance transfer credit card
Now that we understood the meaning of balance transfer credit cards let’s consider the advantages of using such a card.
The rate of interest is reduced
The foremost advantage of such cards is that one can take advantage of low interest. This is mainly beneficial when your credit card has a higher interest rate. Balance transfer of funds to low-interest credit cards helps in repaying the amount quickly. Also, as the interest rate is lower, a major share of the monthly payment goes towards credit card balance. In this way, you can pay back your debt faster.
Payment is made much easier
Combining all your credit card balances to one card is very convenient. As all your existing debt is in one place will let go of the trouble to make a payment towards various cards. A single credit card with low interest is a simple and undemanding way to repay the debt.
Let go of unreasonable conditions
Some of the credit cards carry certain conditions like hidden charges and late fees. These conditions are not pleasant, and also you need to know them to avoid paying extra money. But by balance transfer interest and debt to a different card with less condition is less stressful.
Improvement in credit –score
Usually, an individual credit score is calculated based on the amount they owe. When a person has more than one credit card, his interest rate differential, which increases the amount he owes. So to maintain a good credit score, it is best to utilize balance transfer credit card service.
With the help of a balance transfer credit card option, an individual can club the debt and pay interest at a low price. This is the biggest and most essential advantage of such credit card service.
Cons of balance transfer credit card
Irrespective how good a service is, it does contain some cons. Here we will be discussing the disadvantages of balance transfer credit cards.
Not everyone gets a low-interest rate
Not all individuals who transfer the balance to a different credit card are eligible for a lower interest rate. Usually, the benefits of paying back the credit card debt at a low-interest rate are available to few. To be able to avail this offer, you need to have a good credit score. Or else, even after using credit card balance transfer service, you need to repay at the higher interest rate.
Read the terms of transfer careful
Not all balance transfer credit card service is beneficial. Sometimes certain services include hidden charges and conditions for transfer. So before opting for such service read the terms and conditions of the service carefully.
It can get expensive
You need to pay a certain fee for balance transfer credit card service. At times, in addition to this fee, some banks charge an annual credit card fee. Therefore, consider the fee you need to pay before choosing the balance transfer service. Also, compare the interest rate of the old credit card with the new one.
The next drawback of the balance transfer credit card is credit limit. The new credit card doesn’t need to offer the same limit as the old one. The new credit card may have a limit on the amount of debt offered. The extension of limits by the card company is based on various factors. So a person needs to be prepared for this. It may so happen that only a portion of debt can be transferred to a new card.
Chance of increasing the debt
Having a new credit card with less interest is tempting for some. It allows you to add more to the credit card debt. So be very careful when picking this service.
Balance transfer credit cards are an amazing service available to all. But this type of card and service comes with pros and cons. Consider them as a whole before making a decision.