Credit cards are useful tools since it allows you to purchase product or service without the need of cash on hand. Additionally, it can improve your credit history, only if you know how to use it properly.
Apart from giving convenience in making payments, many cards, such as citi cash back card offers balance transfer. Many cardholders opt for this benefit to reduce their debt and eliminate it faster. Before you do this type of card transaction, it is important that you know the basics of it.
Here's everything you need to know about balance transfer on credit cards.
- What is balance transfer?
A balance transfer is one of the useful features on credit card that allows cardholders to transfer their high-interest debt from one credit card to another card with a low-interest rate.
- How does it work?
When you choose this card transaction, the first thing you need to do is to indicate who card provider you want to pay, how much you want to transfer, and your account numbers.
Once you are approved for the balance transfer, the card provider will contact your creditors and pays them the amount you have indicated. This process may take one to two weeks, depending on the credit card company you have.
To avoid acquiring late payments fees, make sure that you transfer your balances before the due date since balance transfer make take a week or two to process.
- How much is the balance transfer fee?
Credit card companies may charge 3% up to 5% of the transferred amount to its cardholders. However, this percentage depends on the credit card provider you have.
- What type of balances can be transferred?
Depending on the card provider, you can transfer balances from reward cards, gas cards, or miles-earning cards like citi premieremiles cards. However, remember that if you have a balance transfer feature on your card, you are only given a certain limit on the amount that you have to transfer.
- When to use balance transfer?
If you have a multiple card debt, you can opt to use the balance transfer feature of your credit card. This way, you can save time and money.
- How to be eligible for balance transfer?
Since balance transfer is an advantage given to cardholders, not all can avail this feature. There are certain conditions that a card user must meet to use balance transfer feature. Here are some:
- You must have a good credit history. The credit score must be at least 700 and above.
- Your current debt is not more than 50% of your annual income.
- You do not have any outstanding balances.
Key Takeaway:
Opting for a balance transfer is a great way to save money in paying your debts, especially on the high-interest ones. But remember that this benefit also has their limits. Make sure to check first the terms and conditions of your card provider regarding this card benefit since each issuer has its own set of terms.