When running a business, we aim to rake in more profit than debt. But sometimes, certain situations force us to dive into a debt, resulting to piles and piles of credit.
This is especially true when you accumulate so much debt in a high-interest credit card. You ask yourself, “How did it come to this? How can I end this?” The answer is pretty straightforward: do a balance transfer.
A balance transfer lets you move existing debt from one credit card to another, one with a lower interest rate (preferably 0%).
So how exactly do you do it?
Well, the first step is to choose a credit card with a lower interest rate. If you need help in choosing the best credit card for you, we’ve come up with this guide. So the concept goes like this: you’re using a card to pay off another, but the thing is, you’re getting a much lower interest rate.
How does a balance transfer work?
First things first: you have to let your bank know that you’d like to do a balance transfer. You can do this by either logging into your online account or calling the number at the back of the card. You will need to provide them with the account number that you want to transfer the balance from and the amount you want to transfer.
There’s a catch though: your new card issuer may or may not approve the full amount. It could only be a partial balance transfer. There are factors that the bank considers when reviewing your request – among those is your credit limit.
Until your new card issuer notifies you that your request for balance transfer has been approved, you will need to continue making payments on your old card. Usually, the review and approval takes about three weeks.
Note, though, that you cannot transfer debt between products from the same issuer. For example, you cannot transfer debt from an American Express card to another American Express card.
How to choose the right balance transfer card
In order for you to make the best decision, here are some points that you will need to take a look at before you choose a new card:
- Balance transfer fee: There is usually a fee of 3% to 5% of the amount you plan to transfer. Some card do not have a balance transfer fee. You’ll have to look into this before choosing a card for you.
- Interest rate on transferred balances: Find the ones with 0% interest for intro periods. Usually, cards that are designed for balance transfers have a lower introductory rate. Be wise about this.
- Length of promotional period: A balance transfer should allow you some breathing room to pay your debt, so go for the ones with a 0% introductory interest rate and choose the one with the longest promotional period. At the end of the promo, rates go up (usually to the same rates that other cards charge), so make it a goal to pay off the balance before the promotional period is up.
- Annual fee: A card with no annual fees is the best choice for balance transfers.
So are you suffering from paying too much debt on a high-interest card? Why not try a balance transfer? Look into your options – and again, don’t make financial decisions hastily. Read all the resources you can get out there and be informed so you can make the best business decisions.