Credit card balance transfers offer a number of benefits to credit card holders.
Perhaps the most obvious (and important) is the ability to lower your existing credit card’s interest rate.
Most credit cards have an APR somewhere in the teens or above 20%, so if you carry a balance each month, you’re likely throwing away loads of money via costly credit card finance charges.
Either option will save you serious money, even factoring in any balance transfer fees that may apply.
Let’s look at an example of the money saving benefits:
Current credit card balance: $4,000
Current APR: 19.99%
Balance transfer offer: 0% APR for 12 months, 12.99% thereafter
Balance transfer fee: 3%
In the rather typical scenario above, you’d be paying about $800 annually in credit card finance charges if you continued to carry that $4,000 balance (I’m using simple math and assuming your balance stays constant.)
If you decided to accept a credit card balance transfer offer of 0% APR for 12 months, you’d pay $120 in balance transfer fees, pushing your balance to $4,120 on the new balance transfer credit card.
However, you wouldn’t be subject to paying any finance charges for a full year, so you’d save a considerable amount of money by executing the credit card balance transfer.
This is clearly the biggest benefit of a balance transfer; saving money! Lots of it!
Balance Transfers Allow You to Consolidate Debt
Another great benefit of a balance transfer is the ability to consolidate debt so it can be more easily managed.
If you have multiple credit cards with high balances and super high APR, you may feel overwhelmed, and unsure of which to pay first. You could even fall behind on payments, which could harm your credit score.
For some reason, consumers tackle debt better when it’s all in one place. Psychologically it makes a lot of sense. So moving multiple credit card balances to one balance transfer credit card will make your life a lot easier.
You’ll only have to make a single payment each month, instead of trying to keep track of everything all at once. Forget about varying due dates and different minimum payments across issuers. Just make one payment and be done with it!
Additionally, if the outstanding balance isn’t growing (thanks to the 0% APR), you may have a greater motivation to finally pay it off. And a much easier time doing so.
Keep in mind that your credit score might take a hit initially thanks to the new balance transfer credit card (and the high balance on it), but over the long term it should greatly increase your credit score.
Do a little math to see if a balance transfer is a good idea for your unique situation.
Additional Balance Transfer Benefits:
– Lower APR (or even 0% APR)
– Lower monthly payment
– Fewer finance charges (or none for a certain introductory period)
– One single payment (if consolidating credit cards)
– Reduced debt
– Money saved!
– Higher credit score eventually
Read more: Balance transfer problems.