- 1 How To Get The Best Deal On A Credit Card Balance Transfer
- 1.1 What Is A Credit Card Balance Transfer?
- 1.2 Why Would Anyone Want To Do A Balance Transfer?
- 1.3 Why Would A Credit Card Company Offer A Balance Transfer To Its Customers?
- 1.4 How To Get The Best Balance Transfer Deal
- 1.5 BREAKING DOWN 'Credit Card Balance'
- 2 How to Apply for a Credit Card Balance Transfer
- 3 How do I get a high-limit credit card?
- 3.1 At a glance: Credit cards that may come with a high credit limit
- 3.2 Before we talk about high-limit credit cards, let’s review what a credit limit is.
- 3.3 Why might I be interested in a high-limit credit card?
- 3.4 OK, but how do I actually get a high-limit credit card?
- 3.5 How does having a high credit limit impact my credit?
- 3.6 Which type of high-limit credit card should I target?
- 3.7 What are the potential pitfalls of a high-limit credit card?
- 3.8 Charge card vs. credit card: What’s the difference?
- 3.9 Starbucks Rewards™ Visa® Card review: Worth it for coffee.
- 3.10 AvantCard review: A solid starter credit card
- 3.11 Hilton Honors American Express Card review: Hotel rewards with.
- 3.12 Credit Karma Guide to Credit Cards
- 3.13 Southwest Rapid Rewards® Plus Credit Card vs. Southwest Rapid.
- 4 How to Transfer a Credit Card Balance in 5 Simple Steps
How To Get The Best Deal On A Credit Card Balance Transfer
If you have a significant amount of credit card debt, you might want to consider doing a balance transfer to a new credit card. Transferring a credit card balance from a high interest rate card to a low interest rate card is a great way to reduce your overall credit card debt. However, there are some important things you need to know in order to get the best deal on a balance transfer.
What Is A Credit Card Balance Transfer?
Before examining how to get the best deal on a balance transfer, you need to understand what a credit card balance transfer is and why it might be a good idea to get one.
In the simplest terms, a credit card balance transfer is using one credit card to pay off a portion or all of the balance of another credit card. For example, you might use a new credit card to pay off $5,000 of debt that you have on another credit card. After the transfer, the new credit card would now have a balance of $5,000 and the old credit card would reduce its balance by $5,000. Typically, balance transfers are only done when the debt is transferred to a credit card (or cards) with a lower interest rate than the original card.
Why Would Anyone Want To Do A Balance Transfer?
In general, you should only do a credit card balance transfer if it results in you paying a lower interest rate on the transferred debt. For example, in the example above, it would only make sense to do the $5,000 transfer if the interest rate on the new card is lower than the interest rate on the original card. Having a lower interest rate will allow you to pay back the debt balance faster because more of your monthly payments will go to repayment of the principal balance.
Many credit card companies will give you a promotional period when you do a balance transfer with them. During the promotional period, you might pay no or little interest on your debt balance. However, once the promotional period expires, the credit card company will typically raise the interest rate significantly (possibly to a level higher than your previous credit card). Therefore, you might want to reconsider doing a balance transfer if you do not think you will be able to pay off the credit card debt before the promotional period ends.
Why Would A Credit Card Company Offer A Balance Transfer To Its Customers?
You might be wondering why credit card companies would offer balance transfers to its customers. Here are three reasons:
- Transfer Fees: Many credit card companies charge a transfer fee for balance transfers. The fee is usually a percentage of the total amount transferred. For example, a credit card company can rake in $100 by charging a two percent transfer fee on a balance transfer of $5,000.
- New Business: Many credit card companies offer balance transfers as a way to attract new business.
- High Interest Rates After Promotional Period: Credit card companies generally offer no or very low interest rates for balance transfers during the promotional period. However, once the promotional period is over, the company can increase the interest rate significantly.
How To Get The Best Balance Transfer Deal
In order to get the best deal on a balance transfer, you need to take these considerations into consideration:
Know How Long The Promotional Period Is
The length of the promotional period will vary depending on the company. It can range from a few months to over one year. However, once the promotional period is over, the credit card company can jack up the interest rate on your transferred debt. Therefore, you need to find out how long you have before the introductory interest rate goes away.
Keep in mind that you will save the most money by paying off the transferred debt before the promotional period ends. If you don’t think you will be able to do this, try to find a longer promotional period with a similarly low rate.
Know What The Interest Rate Is
Remember that you should only do a balance transfer if you get a lower interest rate on the transferred debt.
Many credit card companies charge a transfer fee for balance transfers. If the card company you are planning on doing a transfer with charges a fee, make sure you know what that fee will be. In some cases, the size of the transfer fee might outweigh any savings benefit that you would get from the lower interest rate. In this case, you should not do the balance transfer. Note that balance transfer offers with no transfer fee tend to have shorter promotional periods.
Some credit card companies have stipulations that if you miss a payment during the promotional period, the interest rate will automatically increase. If your company has that stipulation, make sure that you do not miss a monthly payment.
The better your credit score is, the better offers you will get from the credit card companies. Be aware that the promotional percentage rates that you see in advertisements are generally for people with the best credit profiles. Expect to be charged more if you have less than stellar credit.
It’s always wise to shop around in order to get the best deal on your balance transfer. Look for long promotional periods, low interest rates and low or no transfer fees. Keep in mind that you should only do business with reputable credit card companies. Remember that if it seems too good to be true, it probably is.
If you have a boatload of credit card debt that you are paying a high interest rate on, you might want to consider a balance transfer. However, you need to make sure that you get the best possible terms on the transfer in order to make the transaction worth your while. Do your homework ahead of time and you can end up saving money and paying down your credit card debt.
A credit card balance is the amount of money owed to the credit card company. A new credit card balance may take up to 24 hours to update, once a payment has been processed depending on the credit card company and method of payment employed. The balance can be positive, negative or zero depending on if money is owed, if a payment greater than the balance was made or the balance was paid in full.
BREAKING DOWN 'Credit Card Balance'
A zero credit card balance is the best approach to manage credit effectively in order to avoid the high interest rates associated with a positive balance. If there is a positive balance, paying more than the minimum monthly payment pays it down quicker, resulting in less interest owed to the credit card company.
A credit card balance is the amount of charges owed to a credit card company based on purchases made that have not been paid yet. The balance includes recent purchases, any unpaid balance, interest charges, annual fee and any other fees associated with the credit card such as a late fee or inactivity fee. Every new purchase is added to the balance, and each payment made reduces the balance.
Paying off the balance saves money on credit card interest, which reduces the money paid to the credit card company and increases monthly cash flow and liquidity. However, carrying a balance month to month lowers a credit score because it increases the credit utilization on the card. An ideal credit utilization is 20% or less. For example, if you have a credit limit of $5,000 and a $4,000 balance on your credit card, your credit utilization is 80%, which is extremely high. This type of behavior shows creditors and lenders that a cardholder is not responsible with credit and is a high risk of defaulting on a future loan or credit card payment.
Maintaining a high credit card balance can lead to disaster. If an unexpected emergency arises, possessing a high balance reduces the flexibility to use a credit card and increases the chance of going further into debt, using risky financial products or paying late fees. Credit utilization is one of the factors used to calculate a credit score. It counts for 30% of a credit score. A low credit utilization proves to creditors and lenders that a cardholder is able to manage credit responsibly.
Using a credit card is essentially using the credit card company’s money to make a purchase. In addition, a cardholder makes a purchase but pays for it with money earned in the future. The key to paying down a credit card balance is to determine the report date; the date an account is reported to the credit reporting agency and pay the bill prior to the report date or statement closing date, which increases a credit score.
How to Apply for a Credit Card Balance Transfer
Transferring balances from a high-interest credit card to a low-interest one can be a valuable tool in managing personal debt. If you possess multiple credit cards with high interest rates, consider consolidating the balances onto one card. If you have good credit, it's possible to find credit cards with short-term 0 percent interest rates for transfers or low rates. Fees and rates are just some factors to consider when determining how to apply for a credit card balance transfer.
Finding a Balance Transfer Credit Card Edit
How do I get a high-limit credit card?
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At a glance: Credit cards that may come with a high credit limit
Before we talk about high-limit credit cards, let’s review what a credit limit is.
In short, it’s the maximum amount you’re allowed to spend on the card without being subject to a penalty or paying off at least some of your balance.
Targeting a high-limit credit card can be a tricky business, since your credit card issuer determines your credit limit when you apply for a card. Their decision may depend on a variety of factors, including your income and credit history. More on that later.
For now, it’s important to clarify that “high credit limit” is a bit of a subjective term. What’s high for one person might be low for another.
According to Jason Steele, credit card expert and contributing writer for The Points Guy, $10,000 is generally considered a high credit limit for a credit card, so that at least gives us somewhere to start. However, people with excellent credit may be approved for even larger credit limits.
How does my income affect my ability to get a high-limit credit card?
Every lender's decision is based on a variety of factors, including your income, so if you have a high income but a lot of debt, lenders might think you’ll have trouble paying off your credit card. And if you’re a stay-at-home spouse or partner with no individual income to report, you can still apply for a card and provide the income you share with your partner.
Why might I be interested in a high-limit credit card?
Good question! The answer depends on your financial goals and ability to pay off your balance responsibly and on time.
Getting a high-limit credit card can provide peace of mind if you ever need to borrow a large amount of money on short notice. Depending on how much you spend, a high-limit card can also lower your credit utilization ratio (how much of your credit you’re using compared to how much you have available).
Here’s an example: If you typically spend $1,000 per month and you have a $2,000 limit on your card, your credit utilization ratio is 50 percent, much higher than the expert recommendation of 30 percent.
However, if your card has a $5,000 limit, your ratio drops to 20 percent.
Some folks may target high-limit rewards credit cards because they’re big spenders and want to earn the most cash back or points possible.
These cards also tend to come with high annual fees, so they’re generally a better fit if you know you’ll spend enough to warrant paying around $450 to $550 annually just for the privilege of using the card.
OK, but how do I actually get a high-limit credit card?
According to Adam Vega, a Certified Financial Planner™ with United Capital, the best way is to begin with a high income and excellent credit which is, of course, easier said than done.
If you have a card and you want to increase its limit, you may still be able to qualify for a higher credit limit but it might take a bit more legwork.
If you make consistent on-time payments in full, or your credit has improved since you first got the card, consider asking your card issuer to increase your limit. You can do this over the phone with some issuers or online with others (such as Chase).
One drawback to asking for a credit limit increase? This may result in a hard inquiry on your credit reports, which can drop your scores by a few points.
How does having a high credit limit impact my credit?
Using your new high-limit credit card wisely can benefit your credit — assuming you do so responsibly.
One of the larger determining factors for your credit scores is your credit utilization ratio. The lower the percentage of your available credit you use, the better (we recommend keeping your credit card utilization below 30 percent on each card and collectively).
Adding on another credit line with a high limit can potentially lower your credit utilization ratio, making you look more favorable to lenders.
Of course, if you use a high-limit credit card to rack up a huge balance, your credit utilization ratio could swing the other way and hurt your credit scores.
To keep the benefits of having a high-limit credit card, make sure you spend responsibly and pay off your balance in full each month, where possible.
Do I need good or excellent credit to get a high-limit credit card?
Generally speaking, yes. According to Discover, your credit score is generally the most important figure that’s considered when determining your credit limit.
Which type of high-limit credit card should I target?
If you’re targeting a high-limit credit card, you’re probably someone who regularly spends a lot on your card and could benefit from a lucrative rewards credit card.
Cash back and travel rewards are two popular types of rewards credit cards. Cash back cards offer you a set percentage of cash back from purchases you make.
Travel rewards cards earn you points or miles that you can redeem for travel, whether through an airline frequent-flyer program, an issuer-specific rewards portal such as Chase Ultimate Rewards® or as a credit applied to your statement.
To figure out which card to apply for, consider where you spend your money and how you might want to redeem your rewards. Many high-limit credit cards often come with bonus perks, such as airport lounge access to a fee credit for Global Entry or TSA Pre✓®.
What are the potential pitfalls of a high-limit credit card?
As Winston Churchill once said, “Where there is great power, there is great responsibility.”
This is a good rule to follow when it comes to applying for a high-limit credit card. Yes, it’s a powerful tool, but if you’re not careful, it can end up causing more damage than good.
Spend responsibly and adopt good financial habits such as full, on-time payments, and you’ll have a lot less to worry about. Emergencies happen, but we recommend only making purchases that you can afford to pay off in full when your monthly bill comes due.
A high-limit credit card can be a great addition to your financial arsenal, but you’ll have to be approved for one first. Those who do get approved for a high credit limit tend to already have great credit and a track record of being responsible with their credit.
Finally — and perhaps most importantly — you’ll be prepared for an emergency by having a large line of credit in your back pocket.
Charge card vs. credit card: What’s the difference?
Starbucks Rewards™ Visa® Card review: Worth it for coffee.
AvantCard review: A solid starter credit card
Hilton Honors American Express Card review: Hotel rewards with.
Credit Karma Guide to Credit Cards
Southwest Rapid Rewards® Plus Credit Card vs. Southwest Rapid.
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How to Transfer a Credit Card Balance in 5 Simple Steps
If you’re carrying debt on a high-interest credit card, you might be considering a balance transfer. After all, this will save you money on finance charges and help you pay off your debt faster.
But what are the logistics involved in moving a balance from one card to another? The Nerds will walk you through the process below:
1. Get educated about balance transfers
Balance transfers are a good opportunity to save money on interest, but there are a few quirks to this debt payoff technique that aren’t commonly discussed. Be sure you fully understand and are comfortable with them before taking the next step:
- Transferring a balance often comes with a fee of 3% of the amount you’re moving onto the new card. Be sure to factor this in when you do the math to determine whether a balance transfer is right for you.
- The interest-free period on your new card won’t last forever. Most cards only give you 6-15 months at 0%.
- After your 0% APR period is up, you’ll have to start paying interest on your remaining balance, so know the ongoing APR of the card you’re moving your debt to.
- If you miss a payment during the 0% APR interval, your deal will likely be canceled, and you’ll have to start paying interest right away.
- Most balance transfer deals are only available to those with very good credit. If your score is sub-par, you might have better luck transferring your debt to a card with a low ongoing APR.
2. Apply for the balance transfer credit card
Now it’s time to find and apply for the card you’ll be transferring your balance to. There are lots of offers on the market, so use the tool the Nerds created to make the search a little easier.
Aim for a low balance-transfer fee (or no fee) and a long 0% APR promotion.
As you’re comparing cards, be sure to pay special attention to the length of the 0% APR period and the balance transfer fee. Ideally, the card you pick will have a low fee (or perhaps none at all) and a long 0% APR promotion.
Additionally, figure out how much you’ll need to pay each month to eliminate your debt before the interest-free period is up – doing so means you’ll be squeezing the most value out of the balance transfer. If the payments are too high with one card, look for another with a longer 0% APR interval.
Once you’ve found the card that’s right for you, complete the online application and sit tight for a response!
Once you’ve received your 0% APR card, it’s time to gather the materials required to transfer the balance. Specifically, you’ll need the account information for the card you’re moving the debt from and the exact amount you want to transfer.
Now it’s time to call the 0% APR card’s customer service center. Explain that you’d like to transfer a balance onto your new card, then provide them with the information you just gathered.
After that, your job is done – they’ll get in touch with your old credit card company and move the balance you specified onto your new card. This can sometimes take a week or two to complete, so be patient!
5. Make a plan to pay off your debt
Escaping the stranglehold of sky-high interest rates is something to celebrate, but it’s no time to rest on your laurels.
Pay your balance quickly and use a budget to help avoid future credit card debt.
Follow the Nerds’ tips below to create a detailed debt payoff plan; this will ensure that your balance will be gone before the 0% APR period is up:
- Create a budget – Make a strict spending plan that accounts for a hefty payment toward the 0% debt. Then follow it!
- Eliminate extras (for now) – You should have already calculated the amount you need to pay each month toward your 0% APR card to get rid of the balance before interest starts accruing. But consider that your “minimum” payment – paying more will get you to debt-free faster. Cut unnecessary expenses for now to free up extra cash.
- Track your spending – The best way to make a budget work is to keep tabs on your spending, so don’t let a dollar go untracked.
- Keep going – Even after your 0% card is paid off, keep up with budgeting and tracking your spending. That way, you won’t have to worry about credit card debt in the future!
The takeaway: Once you’ve found the right card, transferring a balance is pretty easy. Just be sure to pay it quickly and take steps to avoid credit card debt in the future!