A balance transfer credit card is a type of credit card that allows you to move outstanding debt from one or more existing credit cards to a new card, typically offering a lower or 0% introductory interest rate (APR) for a set period of time
. This transfer consolidates your debt onto a single card, which can make managing payments easier and potentially save money on interest charges
. Key features of a balance transfer credit card include:
- Lower Interest Rate: Often a 0% or reduced APR for an introductory period ranging from six to 18 months, allowing you to pay down debt without accruing interest during that time
- Balance Transfer Fee: Usually a fee of 3% to 5% of the amount transferred, though some cards may waive this fee
- Debt Consolidation: Combines multiple credit card balances into one, simplifying payments and due dates
- Eligibility: Typically requires good or excellent credit to qualify for the promotional rates
Using a balance transfer card can help reduce the cost of credit card debt and accelerate repayment if you pay off the balance before the promotional period ends. However, new purchases on the card may incur higher interest rates, and failing to make minimum payments on time can void the promotional APR, leading to penalty rates
. In summary, a balance transfer credit card is a financial tool designed to help consumers manage and reduce credit card debt by transferring balances to a card with a lower interest rate and potentially saving on interest payments
