Understanding Balance Transfer Credit Cards

Fincrew
3 min readMay 2

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Understanding Balance Transfer Credit Cards

Can you remember the first time you applied for a credit card? In most cases, it comes from someone calling you about a credit card, offering a great deal, and saying that you have to pay nothing to apply for it. Without a second thought, you accepted the offer. Having received the card in the mail, you immediately began using it constantly without overthinking it until you reached the limit. Before you know it, you have another credit card maxed out. You may end up drowning in debt if you are not careful and may eventually experience bankruptcy. It is a problem to prevent if you know how to manage your spending behavior. Fortunately, if you’re already in a rut and want to settle your credit card balance at a cheaper rate, you can apply for a balance transfer credit card.

To Begin With, What Is a Balance Transfer Credit Card?

Balance transfers involve the transfer of outstanding debt between one or more credit cards and a balance transfer card issued by another bank with lower or no interest fees. You apply for another credit card to settle all your other credit card debts! What is the purpose? Of course, to save on interest! If you’re wondering if something that looks too good to be true exists, fret not; we will explain. Suppose you have an RM8,000 credit card debt with 15% annual interest. This balance is transferred to a new credit card with 0% interest for the first 12 months. You will save RM1,200 on interest if you pay it off within 12 months! Note: It does not include upfront fees and balance transfer fees. They do this to convert you to their bank, which is why, for example, you cannot transfer a Maybank card to another. Nevertheless, they could make money from other aspects, including balance transfer fees, handling fees, and high-interest rates charged when a debtor cannot pay off the amount due within the specified period, usually 6 to 12 months.

Benefits Of Balance Transfer Credit Card

Some advantages of transferring balances using a credit card are listed below.

A low introductory interest rate

Several credit cards offer low introductory rates for balance transfers. If you use that rate, you will pay far less interest over a balanced life.

Consolidating your credit card debt

Consolidating multiple balances on one card means dealing with only one interest rate and one monthly payment. You will have peace when you are working to pay off your debt.

Having the ability to pay off your credit card debt more quickly

Also, the lower interest rate could help you pay off your credit card balances faster because you will save more money.

How To Get One

Those who can pay off most or all of their debt during the introductory rate period will benefit from applying for a balance transfer credit card. After the initial rate period ends, the balance recharge will be at a high-interest rate. Therefore, only consider a balance transfer if you are confident you can repay the amount due within the specified timeframe.

Are you ready for your first application?

It is important to compare balance transfer credit cards thoroughly before choosing one. The points to consider while selecting a balance transfer credit card are below:

— Most balance transfer credit cards have a minimum duration of 3 to 36 months.

— Interest rates are from 0% p.a. up to 10.22% p.a.

— From RM500 to RM5,000 can be transferred as a minimum.

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