Have you ever heard of balance transfers? If not, you may be missing out on a way to save money if you have a high-interest credit card. A balance transfer is a type of credit card transaction in which debt is moved from one account to another with lower interest rates.
What are good credit card options?
Utilizing a balance transfer offer is a strategic way to save serious money on interest charges. For example, debt that’s moved to a credit card with a 0% introductory APR offer on balance transfers could potentially be paid off interest-free. But it all starts with picking a credit card that works for you.
Here at ValleyStar Credit Union, we offer two types of credit cards. TheValleyStar Horizon Rewards Visa Card helps you earn points for every dollar you spend. Points are redeemable for merchandise, travel, gift cards, cash and more. While the ValleyStar Horizon Visa Card allows for purchase flexibility and helps you stay in control of your finances.
ValleyStar Horizon Rewards Visa Card: ValleyStar Horizon Visa Card:
|uChoose Rewards Program||Low rate|
|Low rate||Credit Limit up to $30,000|
|Credit Limit up to $30,000||No annual fee|
|No limit or point expiration||No cash advance fee|
|No balance transfer fee||No balance transfer fee|
|No annual fee||Security of EMV chip technology|
|No cash advance fee||2% foreign transaction fee|
|Security of EMV chip technology|
|2% foreign transaction fee|
The Federal Reserve rate changes are causing credit card rates to increase; that’s why ValleyStar Credit Union speaks zero out that balance! For a limited time, you can transfer your high-interest credit card balance to a ValleyStar 0% APR credit card for 15 months.
Will I save money with a balance transfer credit card?
Moving high-interest debt to a credit card with 0% APR can be a big money-saver! Generally, you’ll have to pay a balance transfer fee — usually, 3% to 5% of the total transferred. Once the balance transfer is complete, all credit card payments will go toward the principal, helping you to pay down debt faster while saving in interest.
How much you save depends on your debt amount and current credit card interest rate. However, balance transfers, especially with 0% APR, usually guarantee some degree of savings. Use the Balance Transfer Savings Calculator to see how much you can save.
What is the balance transfer process?
Balance transfer processes can vary widely depending on the credit card issuer, but the main steps are usually as follows:
- Apply for a card with an introductory 0% APR offer on balance transfers or use an offer on a card you already have. Keep in mind that you generally have to have a good or excellent credit score to qualify for the best offers. Also note: Same-issuer transfers generally aren’t allowed. For example, if you want to transfer a balance from a ValleyStar card, you can’t transfer it to another ValleyStar card.
- Initiate the balance transfer. You may do this online or by phone. You’ll need to provide information about the debt you’re looking to move. Some information that will be asked is your credit card issuer, the amount of debt on the card and your account information.
- Wait for the transfer to go through. Once the balance transfer is approved, which could take two weeks or longer, the issuer will generally pay off your old account directly. That old balance, plus the balance transfer fee, will show up in your new account.
- Pay down the balance. When that balance is added to the new card, you’ll be responsible for making monthly payments on that account. If you pay it down during the introductory 0% APR period, like ValleyStar’s 0% for 15 months offer, you could save money.
Are balance transfers worth it?
Participating in a low-rate balance transfer offer can be a small amount of work for a great reward. Debt payoff is a big accomplishment, but ultimately, you have to decide what fits your lifestyle. If you can pay off a balance in a few months or sooner, or you can’t qualify for a good 0% APR offer, paying off your debt as quickly as possible might be the most cost-effective option.
Generally, a balance transfer is the most practical choice if you need months to pay off high-interest debt and have good enough credit to qualify for a credit card with a 0% APR on balance transfers. This could save you on interest and give you an edge when paying off your balances.
Are there limits to balance transfers?
There are certain costs and limitations for balance transfers. Credit card balance transfers are often limited to an amount equal to the account’s credit limit. This means you cannot transfer a balance greater than your credit limit, and you won’t know your credit limit until you’re approved for the account. If your balance transfer card’s limit is low, you might not be able to transfer your total balance.
Can balance transfers impact my credit score?
It’s important to note that balance transfers can affect your credit score. This depends on if you open a new card to transfer a balance and what you do once your balances have been transferred. Anytime you apply for a new credit card, your credit history is hard-pulled to see if you qualify. Hard pulls on your credit history cause your credit score to drop temporarily.
If you get approved for a balance transfer card, making your monthly payments on your new card is essential to prevent further dings to your credit score. Balance transfers do not reduce the total amount of money you owe. If you owe $3,000 on one credit card and transfer it to a new credit card, you still have $3,000 worth of debt – it’s just in a new place. You’re also still on the hook for any unpaid interest accumulated on the account before transferring your debt.
Will the balance transfer lower my payment?
If your current credit card has a high-interest rate and you are trying to pay down your credit card balance, transferring to a lower-interest-rate card can help reduce your monthly payment. Since you won’t pay as much interest, you will likely save some money.
What are the drawbacks of balance transfers?
We’ve already discussed the benefits of balance transfers, such as potentially paying off your debt without spending a penny on interest and lowering your monthly payment. However, some drawbacks must be taken into consideration.
You will most likely have to pay a 3% to 5% transfer fee of your total debt amount to move your balance to a new credit card. While this may seem offputting at first, interest charges add up quickly and are often far more costly than a one-time 5% fee.
You should also make sure you can pay off your debt before the promotional period ends. Balance transfer cards are usually only set to 0% APR for a limited time (15 months at ValleyStar Credit Union). If you pay past the promotional period, you may be at risk of increasing your debt once the interest rate goes up.
Consider balance transfers to help get out of debt quicker.
Balance transfer promotions are an excellent way to zero out your balance quicker while saving money on interest. There are many factors to consider, but if you find that making the transfer is right for you – we encourage you to do so! Visit our website to see our credit card options and apply for your 0% APR balance transfer.