What's a Balance Transfer?

In short, a balance transfer allows you to pay off high interest rate debt by borrowing money from a low interest rate account. Credit card companies often don't advertise this feature as a part of their services, but it can be a great way to minimize debt in the long run.

But how much do balance transfers cost and how do they work?

Balance transfers typically involve a transfer fee of approximately 2% - 5% to take part in the process. Here are the requirements to make a balance transfer:

• Have a card in mind with a good balance transfer policy. Most cards have a 0% introductory APR on balance transfers, but if the transfer rate is lower than the interest rate you're paying off, you will still save money in the long run.
• Once you have a card in mind, initiate the balance transfer (you are now borrowing credit to pay off the higher interest rate debt). You will likely need information about the account you're aiming to pay off to finish this step.
• The transfer has complete, now focus on paying off the balance of the credit card you're borrowing from. It's important that this is done in a timely fashion to shield your credit against any dings that would occur from a missed payment.

And… that's it! You've learned another way to minimize debt! To summarize, balance transfers can be a good idea to save money in the long run if you have high interest debt. Be mindful of the card and policy on balance transfers before jumping in. Some cards have better balance transfers than others, so if you find yourself in a position needing the ability to conduct a balance transfer, it may be worth while to apply for a new card. Cheers!