What Is A Balance Transfer, And Should I Do One? – This is Part 5 of a Q&A session with Floyd Sijmons, CEO of CompareHero.my, giving you unbiased views on credit cards, loans, even insurance and home services (like broadband and telecom) , along with other financial products in the Malaysian market.
About 80,000 cases of bankruptcy were reported in Malaysia between 2005 and 2010. Debt is a widespread problem, further fueled by a lack of financial literacy. There are various solutions to deal with your debt problems – among them, balance transfer. Balance transfers can help minimize your credit card debt — but they can also do more harm than good to your finances if you’re not careful. It is important to fully understand how balance transfers work – with all the terms and conditions – before going for this option.
What Is A Balance Transfer, And Should I Do One?
A: Balance transfers involve transferring your outstanding credit card debt to a new card that offers a very low or zero percent annual percentage rate (APR). The idea is to consolidate all of your credit card debt into one card, at one interest rate. Your payments go directly to the principal amount you owe, instead of the accrued interest.
Balance Transfer — Metro Medical Credit Union
Answer: Balance transfers offer a viable solution to your mounting debt problem. Using a zero percent balance transfer credit card can lower the interest on your credit card debt and allow you to better track and manage multiple debts. A balance transfer can also improve your credit score if you meet your monthly obligations promptly and diligently.
• Transferring all of your debt to a balance transfer card incurs a balance transfer fee. The industry standard is usually three percent of the amount of debt you’re transferring. The rate also depends on how long the promotional rates are available.
• You are more likely to be approved for a balance transfer credit card if you have good credit.
• Some banks specify that only transferred balances qualify for promotional rates. If you get a balance transfer card that offers a zero percent promotional fee, you’ll continue to pay interest on new purchases made using the card.
How Credit Card Balance Transfers Work
• In addition to credit card debt, you can also transfer other types of debt to a balance transfer card, such as car loans, appliances and other monthly payments.
• Don’t overdo balance transfers. Applying for another low-interest card right when the promotional rate on your last card is about to expire hurts your credit score.
Answer: Some factors include contract terms, introductory rates offered, and rewards programs. Online customer reviews and expert advice can also be helpful. If you search CompareHero.my, Malaysia’s leading online comparison portal, for the best balance transfer credit cards, the following cards from RHB Bank Bhd (RHB) make the top 3:
• Zero percent interest valid for 24 months; Annual fee RM70; 18 percent April; up to 10 percent cashback RHB MasterCard Gold.
My Balance Transfer Period Ended And I Still Have Debt — What Now?
• Zero percent interest valid for 24 months; annual fee RM130; 18 percent April; 1 reward point per RM1 spent RHB MasterCard Classic.
• Zero percent interest valid for 24 months; Annual fee RM70; 18 percent April. Check out CompareHero.my to find deals on balance transfer credit cards.
Answer: Consolidate your existing credit card debts into a balance transfer card to save money you would otherwise have paid in interest.
Examples: Rama is paying off RM2,000 of debt on a card with 18 percent APR. If she does a balance transfer to a credit card that charges three percent, or even 0 percent, she can definitely pay less in her monthly payments.
Why Should You Choose A Home Loan Balance Transfer?
The difference may not be huge – as she also has to consider the duration of the introductory fee, as well as the balance transfer fee she will have to pay up front – but she can definitely try to find the best deal. Do’s and Don’ts of Credit Card Balance Transfers?
• Study all terms and conditions when viewing an offer. Check for balance fees, annual fees, credit limit and introductory offer expiration date.
• Compare credit cards online to find the best deal. Sites like CompareHero.my help you save time and money when looking for a balance transfer credit card.
• Assess whether taking out a balance transfer could really save you money by doing your calculations for you.
The Pros And Cons Of Balance Transfer Credit Cards
• See if you can pay off all your debts within six months or within the period in which the special interest rate applies.
• Quickly pass a zero percent offer without checking when the 0 percent teaser fee expires. Promotional interest rates on balance transfer cards usually expire after 6 months.
• Hurry up to close the credit accounts from which you have transferred money. Doing so can negatively affect your credit score.
• Make late payments. Late or late payments may revoke the promotional interest rate on your balance transfer card.
What Is A Balance Transfer Fee—and Can You Avoid It?
This content was created by Floyd Sijmons for Borneo Post readers. Sijmons is the CEO of CompareHero, Malaysia’s leading financial comparison platform today. He believes in the value of saving Malaysians time and money by giving them the information they need to compare financial products in the market. For more of what Floyd has to say, visit CompareHero.my.monetizes from featured partners, but editorial opinions are our own. Advertiser Disclosure 9 Balance Transfer Credit Card Diagrams Clear explanations of how balance transfers can help you manage debt.
These diagrams are for all the visual learners out there—those with debt who want to know why it’s so hard to pay off your credit card balances.
We show you how much you’re throwing away in fees and how a balance transfer credit card can cut the cost to get you out of debt faster.
A balance transfer credit card allows you to transfer other debt – credit cards or loans – to a card with better terms. By transferring debt, you can take advantage of a lower APR on a new card – or even a 0% APR during an introductory period.
Understanding Home Loan Balance Transfer From Poonawalla Housing
Even after factoring in a card’s balance transfer fee, you can save hundreds or thousands of dollars by avoiding the double-digit APRs found on most credit cards.
In our first diagram, we show you what would happen if you paid the same $100 per month in our scenario above, but instead with a stronger balance transfer credit card.
In the first year of responsible spending on your new balance transfer card, you’ll save $741.69 by taking advantage of its 0% introductory period. And if you hadn’t transferred your balance? Paying just $100 a month on your debt, it would take you seven years and two months to pay it off, racking up a further $4,302 in interest.
Assuming that after the introductory fee, your new card comes back in the same April as your old card, you could save $2,076 and pay it off in full 21 months early—just keeping your monthly payments of $100.
How Long Does A Balance Transfer Take?
It may surprise you that almost 73% of your $100 monthly payment is your APR. This means that only 27% of your payment each month goes towards the debt balance.
It’s not recommended to just make the minimum monthly payment, because each swipe you make costs you more than the purchase, which only increases over time.
When an issuer extends a balance transfer credit card offer, it hopes that you won’t pay off your balance in the introductory period. Worse, it hopes you’ll keep spending and accrue high interest on those purchases.
If you continued to make $100 payments after the introductory fee expired, you would spend $2,076 in interest alone. That’s over $150 in balance transfer fees. A potential $2,226 is a good enough reason for a bank to offer 0% APR for the first year.
Conditions In Which I Should Go Take Over Of My Home Loan From One Bank To Other Bank
If you can’t pay off the debt on your balance transfer credit card within the introductory period, you may be tempted to get another one. You usually can’t hold two cards with the same issuer, but another bank may be interested in your business.
Below we compare how much you can save by paying your balance transfer with one card compared to using two cards to pay your balance – and the cost of doing nothing.
To take full advantage of a balance transfer credit card, commit to paying off your balance in full within the card’s introductory period.
Using our scenario, if you can move $429.17 per month over the first 12 months, you can accumulate $4,152 that will be used to pay the interest on your old card. This kind of money is worth budgeting for, reducing the costs to pay off your balance within the introductory period.
Best Balance Transfer Cards With 0% Apr Of November 2023
Here’s what you can buy with the money you saved from paying interest and bank fees.
Compare transfer fees against potential April. If you can pay off your debt before your accrued interest exceeds the balance transfer fee, then focus on making payments to reduce that balance.
We know that $150 in balance transfer fees isn’t chump change: It represents about two months in interest payments. So, if you can pay off your debt within two months, a balance transfer can be done