Balance Transfer Basics
A balance transfer is when a bank pays off your debt with another bank and transfers it into a new account with them. Competing credit card companies offer very low interest rates and annual fees for a promotional period to attract new customers. If you are already struggling with a credit card debt with a hefty interest rate, this gives you an opportunity to transfer your balance to another bank with better terms. This technique can really help you save a lot on interest payments and make your debt more manageable.
Some banks will ask you to provide the details of your debt at the start of the application while others will wait until your account has been opened. If the promotional interest rate is available only for a certain window of time, be sure to clarify with the bank that you fall within this period while your papers are still being processed. Do not hesitate to ask questions, such as if there are penalties for late payment and other charges which are not explicitly stated. Some banks will also set a credit limit, and if your debt is higher than the bank’s credit limit, you may not be able to transfer the entire amount. Compare the rates and fees with your old bank before to make sure you are really getting better terms.
This guide gives you a comparison of rates across different credit cards to help you weigh your option.