Money is a big part of our lives, and most of us end up spending it on things we do not need. If you are like many of us, you spend money on things you do not truly need by transferring funds to another bank account before transferring it back to the original. Your money is transferred out of your account and into the bank account of your partner, with the money being transferred back to your account upon your partner’s request. This is called a balance transfer, and it is very common in our society.
Balance transfers are a popular feature on the Credit Card Market but controversial. They allow you to make money from your current credit card account and transfer it to a different one, with some fees to help offset the cost of doing so. However, these fees vary greatly—in some cases being extremely high and in other cases being virtually non-existent. Even though there are some negative aspects to balance transfers, most people still find them beneficial, as there are many reasons to use them.
Transferring money from one account to another is always a good idea, but is it really worth it? You may be able to get a better rate through direct deposit or even get a better interest rate, but the amount of money you can transfer is limited by your balance on each account.
Benefits of Balance Transfers
- Decrease credit utilization rate
If you want to lower your debt-to-credit ratio, a balance transfer can be a good way to go. While you may be motivated to make the switch because you want to simplify and consolidate your debt, an equal motivation is to cut your interest rates. You can end up saving hundreds of dollars over the life of a balance transfer, and you will be able to pay off the new debt much faster.
- 0% Interest
0% loans have become popular, but they have been in the spotlight recently over the prospect of a future interest rate hike. Few of us would be willing to take out a personal loan or mortgage with this kind of low-interest rate, so people who do borrow with this low rate will want to be sure it is worthwhile. One factor that influences this decision is the leverage, with a bigger loan available at a lower interest rate. And since the loans are offered without any repayments, this means there is no way to borrow more than you need.
- Consolidates Existing Debt
When you receive a debt consolidation loan, you no longer receive individual payments but one lump sum, which you use to pay off your existing debts. However, while consolidation loans can reduce your cash flow and interest rates, they do not give you the freedom to spend or not spend as you please. This means that while they can help you reduce your debt and make a dent in your savings goal, they do not give you enough breathing room to spend or make impulsive purchases without worrying about hitting your debt limit or ruining your credit score.
So, are balance transfers worth it?
Balance transfers are a quick and easy way to move money from one credit card to another, but are they worth it? Yes. Balance transfers are a powerful tool for consumers. They are generally low-risk and can save you hundreds of dollars in fees. Balance transfers are worth it. Many people make the mistake of thinking that because balance transfers are a type of rotating credit card, they are not worth it. But the reality is that they are a good way to transfer credit card debt from one card to another, whether you have good or bad credit. You can take advantage of the 0% introductory APR on balance transfers to get a new card with zero or close to zero interest and then transfer the debt over to the new card.
As the saying goes, “everything is negotiable.” And getting a good return on your money is no exception. If you are looking at paying off your credit card balance, there are ways to do it without incurring a fee. Balance transfers are one of them.