There are many individuals in debt, but not many understand the various ways to get out of debt; using the balance transfer credit cards is a not so obvious way to pay off debt. The balance transfer credit cards are a great way to pay debt off and save money while you’re getting out of debt. Below are a few highlights to answer your concerns and questions about balance transfer credit cards.
Why get a Balance Transfer Credit Card
- Reduce the amount of interest you pay on your debt
- Make a payment on a purchase in the future
- Avoid interest payments
- Consolidate credit card debt to one card
Scenario to get a balance transfer credit card
Consider a large debt that you have from a current credit card with 20% interest, let’s say you owe $10.000 AUD. You’re minimum payment is $166 for the interest. So in one year you’ll pay approximately $2.000 AUD which is a lot of money on the interest alone.
Now, let’s consider the alternative with a debt on one of your current credit cards of $10.000 AUD. The best reason for a balance transfer credit card is to eliminate the on-going interest from one credit card and move it to a credit card that offer 0% APR for 12 months to save you $2.000 AUD in interest.
Additionally, a balance transfer credit card makes it easier for you to consolidate credit card debt by moving it over to one card to only have one credit card debt to keep track of.
What you should know about Balance Transfer Credit Cards
It’s not a quick fix for debt related issues, but it will help to put you back on track to pay off your debt while reducing interests for on-going credit card debt. Below is a list of highlights to think about when you’re in the market for a balance transfer credit card:
- A range of 3% to 5% fee is usually mandatory to transfer debt.
- Typically, good to excellent credit is a requirement, so check your credit score before applying to a balance transfer credit card.
- The 0% interest is usually only good for a limited time period, the range is typically between 12 to 18 months and is an introductory offer before the rate resets. Read the fine print.
Two suggested cards for Balance Transfer Credit Cards
Nerdwallet.com provides a rundown of balance transfer credit cards to consider: from Chase credit cards to American Express with the lowest fee at 0% to the highest at 5%.
Chase Slate this is the highest ranked option for a balance transfer credit card without a fee. However, the rate is an introductory rate for the first 15 months is a great offer. In order to obtain and qualify for the offer, the transfer must be complete within the first 60 days after opening the account. If the deadline of 60 days is surpasses than Chase applies an automatic 3% transfer fee with a minimum charge of $5.00 AUD).
Once the 0% APR introductory period expires then it automatically adjusts between 12.99% up to 22.99% based on your credit score. However, there is no annual fee on the credit card and that remains for the lifetime that you own a Chase Slate credit card.
The perks to owning a Chase Slate card are well worth it: free monthly FICO Score, zero liability protection, fraud protection, fraud alerts and purchase protection.
Citi takes second places because of its 0% APR offer for 21 months. This is the lengthiest duration of time for all existing balance transfer credit cards available. However, the condition is to complete the balance transfer is within four months with a 3% balance transfer charge (minimum transfer fee of $5.00 AUD).
- Citi Simplicity Card the credit card offers a 0% credit card balance transfer and on purchases with no annual fees, late fees or penalty rates. After 21 months then it re-evaluates the interest rate depending on your credit score.
- Citi Diamond Preferred Card There is many similarities to City Simplicity Card, offers 0% for balance credit card transfers and purchases. No annual fee, late fees or penalty rates. Then it re-evaluates the interest rate after 21 months, depending on your credit score. However it’s 1% lower than the Citi Simplicity Card at 11.99% to 21.99%.
The Benefits of Citi credit cards
- $0 liability on unauthorized charges
- Citi Identity Theft Solutions
- Extended warranty of 5 years/$10.00 AUD per year (limited to purchases, worldwide car rental insurance for theft or damages and capped at $50.000 per year).
- Travel and emergency assistance before and during your travels
- Connected to Apple Pay
- Citi Price Rewind: Citi will search for a reduced price for 60 days after a purchase and refund each item up to $300 with a limit of $1.200/annually.
[Read: Chase Sapphire Preferred vs. American Express Platinum]
Finding a balance transfer credit card is an option to pay off debt quicker and reduce interest. However, it means that more money goes towards the principal. So as a result your money is working for itself.
Last, keep in mind a balance transfer credit card is not a quick fix but an alternative to set yourself to a healthier financial position, and if you can change your mindset to believe in it then a balance transfer credit card is a suitable option for you.
Here’s what you need to know more as well: