Does Transferring Debt from one Credit Card to another Save Money

If you are seeking to consolidate your debt or reap the rewards of a lower interest rate offered by another brand of card or credit card supplier (bank), it pays to shop around. Interest rates are variable, but some banks may offer a lower interest rate on balance transfers to their credit card for the lifetime of the transferred debt until it is paid off.

Well-known established banks strive to better their competition and some banks focus particularly on their lending options. This includes credit cards. Many banks now offer several types of credit cards. Some have lower interest rates while charging a higher annual account fee, while other cards may have higher interest rates and lower annual account fees. If you aren’t likely to repay your purchases in full by the due date each month, you would be better off looking at a lower interest card with the higher account fee. At least then, you know what to expect.

Before shopping around, assess why it is you need to switch credit card companies. Are their fees too high? Are the interest rates climbing often? Are you using your credit card for cash advances, which tend to reap a higher rate of interest, or are you simply using it on purchases? Are you seeking to pay off your debt and wish to freeze the interest rate or fix it for a period in order to repay it more quickly? Or do you think you’ll be shopping elsewhere in the future for another credit card company? It is much easier to have your bank accounts tied to the same financial institution as your credit cards as many offer Internet banking, options that make repayments over the Internet to your credit card much easier, allowing you to check your transactions on-line and dispute any that look suspicious quickly. In addition, the bank may look more favorably on you if you conduct most of you financial business with them and may offer you special promotions or upgrades with no extra charge.

The only reason it would be a preferred option to transfer balances to a newer credit card is if you are genuinely seeking to lower your accruing interest, especially if you have a large debt and have the goal in mind of paying that debt back, or if you are genuinely sick of the institution you deal with. If you are constantly revolving in debt, then transferring balances to other credit cards on a continuing basis could wind up costing you more in account fees, limit your options to apply for credit limit increases if you are on a fixed income and can be more hassle than it’s worth. Many people don’t have the patience to complete forms.

Credit cards are provided as unsecured lending. This means that there is no physical asset or guarantee the bank or lending institution has with you that the money will be repaid. Responsible lending channels such as major banks assess your income versus your expenditure and it is up to you to provide them with accurate information so they can do right by you. Sometimes a better option is to apply for a personal loan to consolidate debt from a credit card or series of credit cards as sometimes the loan interest rate may be cheaper than the credit card interest rate.

In summary, key things to look for if you are shopping around for a balance transfer from one card to another:
Is the financial institution reputable?
What is the interest rate for the balance transfer from other bank’s credit card to this one?
How long does the interest rate on the transferred balance last?
What is the regular rate of interest for purchases?
What is the regular rate of interest for cash advances?
What is the annual account fee for the new card?
What is the interest free period?
Does the interest-free period also apply to cash advances or does that accrue daily from time of withdrawal?
Does the card come with rewards? Does this cost extra?
How will this new credit card’s interest rate compare to the interest charged on a personal loan?