A balance transfer credit card provides the facility of clearing debt by transferring it to a new card. It means the user starts making repayments on the new credit card, and the existing debt gets paid off.
Such credit cards become a viable funding option for entrepreneurs, individuals, and companies that can’t avail bad credit loans no guarantor, or others. Companies like Halifax, MBNA, Tesco Bank, Barclay’s, Sainsbury, and other enterprises provide balance transfer credit cards in the UK.
There is another significant benefit of balance transfer credit cards. They come with zero percent interest rates and a minimum transfer cost until the promotional period. However, users must take a few precautions before and after availing them.
Balance transfer credit cards provide the benefit of zero percent interest rates; however, users must not forget about the tenure. It is essential to clear the existing debt on such cards in the duration because the owner might get charged between 18 to 40 percent post expiration.
The card user can clear the debt by availing of debt consolidation, emergency, or take same day loans. Optionally, the owner can apply for a new balance transfer credit card to extend the duration and clear existing debt immediately.
Before availing of any balance transfer credit card, you must check the best options by comparing interest rates, funds, annual charges, etc. This practice will help keep a low debt if you fail to clear it after the zero-interest period.
Acquiring a balance transfer credit card doesn’t provide the privilege of funds at zero interest with no repayments. It is necessary to clear minimum repayments to avoid card cancellation or falling into heavy penalties from companies.
As a best practice, a user must pay slightly more than the minimum repayment to recover its debts. Unfortunately, if you feel that reaching such an amount would tighten your financial situation, continue repaying the minimum amount.
Additionally, start investing a portion of the income in a savings account and avail additional interest rates. Besides this, focus on growing your monthly income by taking a new job, reducing existing expenses, investing in the share market, etc.
Credit cards charge interest on withdrawal at the time of availing cash from an ATM. The rule remains unchanged against balance transfers credit cards. Moreover, you might get heavily charged with interest rates on the remaining withdrawal amount if the promotion period expires.
Besides this, companies that offer balance transfer credit cards don’t charge interest rates for a limited time. However, they might charge a minimum transfer fee on a card to card and account transfers.
Also, a hefty interest rate of 18 to 40 percent gets levied on the user if there is any remaining transfer amount. Therefore, the user can incur high costs on failing to make the full repayment.
Furthermore, if you need to spend cash, then avail of a purchase or allrounder credit card. Both provide a zero per cent interest rate duration on card expenditures and transfers.
Many balance transfer card companies provide “up to” zero percent promotional period. It means the owner would get charged a slight interest rate, and it won’t remain negligible during the tenure.
Lenders who provide funds through such credit cards may offer lower duration, higher interest rates, or high fees to bad creditors. Moreover, they may clarify that they offer zero percent to borrowers with a good credit history.
Before availing of any credit card, make sure to check the average duration, interest after the promotional period, availing fees, etc. Such “up to” zero percent deals can lead to catastrophic interest rate accumulation.
A balance transfer credit card provides the owner with at least 60 to 90 days. However, the duration may differ for different lenders or enterprises. Moreover, the zero percent interest rate applies for account transfers to this card for the same period.
Any further transfers can have hefty transfer costs for the owner. Therefore, a user must make sure of the tenure, which often begins from the first day of transferring debt to the card. However, the transfer fee might apply after the first transfer post-promotion period.
Companies that provide such a solution refer to it as “one-off.” Unfortunately, a few balance transfer cards require transferring the amount while applying and others during the zero interest duration.
Balance transfer card users must also remember that many enterprises don’t allow transferring between two cards of a banking group. It is also true if a user attempts to transfer between two cards of the same bank. However, a few banking groups incorporate an exception to this rule.
There is another fact that a balance transfer card applicant must remember. The owner might instantly get charged a 3 to 4 percent interest rate during the application on requesting a balance transfer.
A few banks might even charge a slightly higher interest rate to applicants. Conclusively, you should remember and take these precautions before applying for a balance transfer credit card.