Many credit card companies offer balance transfers with zero percent interest or very low interest, to invite you to consolidate your debts into a single credit card.
What is a balance transfer?
Sometimes banks start campaigns to increase the number of customers of their credit cards.
One of the marketing strategies they use is to offer to buy the debt you have on your credit cards from other banks. The most important benefit is that the interest rate will be lower or preferential than the one now charged to your cards.
Good business, no doubt.
A lower rate will mean that you will pay less interest on the debt.
How does balance transfer work with a credit card?
Suppose that to date you owe for the purchases and advances requested, a total of $ 20 million. If you never used the card again, you would have to pay the debt in twelve months. You could pay it without problems.
But what bothers you is that there are three cards from different entities and with different payment dates. And, there is one that your friends say is “very expensive.”
The solution may be to consolidate the debts of the three cards into one, a purchase of debt with balance transfers.
Each month, in the account statements, you would see the two charges: what you have to pay for the debt and what you owe for your consumption.
Conditions for the user
The decision to accept the new card (or a line parallel to the revolving line of the credit card) will be a good financial decision if:
The interest rate is effectively lower than those of your current card. In your statement, you can see at what rate you are paying for purchases and the availability of cash.
For example, at this time, preferential rates fluctuate between 23% and 55% annual cash. Those on your card can be in the order of 39.99% to 100% (some up to 151%) annual cash for purchases and 55% to 99% for cash advances.
Do you want a lower rate? Request a home equity loan to pay off your card debts
- The charge for the transfer (the payment of the debt) is justified, when doing the evaluation of the interests.
- As a general rule, the bank will not consolidate credit card debts that are past due or overdue.
- Nor do people with a central rating of “poor” or “loss” risk, because it has shown poor financial behavior.
- The debt money will be paid directly to the bank with an interbank transfer.
- The term to pay the debt will be 12-48 months (or less if you pay more money than indicated as a minimum payment).
Requirements for credit card balance transfers
- The bank will proceed quickly with the approval process.
- Fill out the request.
- Deliver copies of CC
- Update financial information (income)
- Update work information (demonstrate stability between 6 and 12 months)
- Account statement of credit cards
- Have a good rating in the risk centers.