The Benefits of Credit Card Balance Transfers

Balance transfer offers seem omnipresent these days. Usually, you can’t even sort through your mail without finding at least one credit card offer touting an unbeatably low balance transfer interest rate. With a balance transfer, the cardholder moves the balance of one or more cards onto another card in order to take advantage of a lower interest rate. The cardholder pays a fee for this service that is typically a percentage of the amount transferred. In the short run, credit card balance transfers can be an effective approach to debt consolidation. Read on for a more in-depth discussion of the advantages of balance transfers.

Appeal of the Balance Transfer

We’ve summarized the most attractive benefits of credit card balance transfers below.

• Simplicity. Credit card balance transfers are amazingly uncomplicated, particularly when compared with other methods of debt consolidation. If you request a balance transfer when you apply for a credit card, you usually just have to fill in a few lines of information on the application. The balance transfer will be processed automatically when your credit card account is created. Alternatively, if you want to transfer a balance to an existing credit card, you can usually do so over the phone or online. Either way, a balance transfer will only take a few minutes to complete.
• Unbeatable rates. You would be hard-pressed to find a debt consolidation loan with interest rates lower than some of those offered with balance transfers. Some credit card issuers routinely offer 0% APR balance transfer offers for the life of the loan, meaning the rate will never change until you’ve paid it off. Because the balance is not accruing interest, you have the perfect opportunity to pay down your principal quickly.
• Earn rewards. If you move your balances to a rewards credit card, you might be able to earn cash rebates, points, or other rewards. This way, you can pay off your debt while also taking advantage of free rewards programs.
• Combine multiple credit card payments. Carrying balances on several different credit card can get unmanageable and inconvenient. With a balance transfer, you can move one or more balances onto a single card to simplify your payments. This way, you have only one bill, one interest rate, and one balance to worry about.
• No collateral required. With most other debt consolidation loans, borrowers must provide collateral in order to qualify. This means your house, car, or whatever other property you attach to the loan is at risk if you miss payments. A balance transfer, on the other hand, is an unsecured loan, so you do not have the worry of losing collateral if you get behind on payments.

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