There are different types of credit cards that are available to consumers in the Philippines. Many people are familiar with standard unsecured credit cards, secured credit cards, and rewards credit cards. These are typically utilized to pay for purchases such as groceries, fuel, and other commodities. Then, there are balance transfer cards. These enable individuals to move the outstanding balance of their existing credit cards into a new one, often at a low or zero percent interest rate.
Why Use a Balance Transfer Credit Card
While other types of credit cards are used to buy consumer goods and services, balance transfer cards are commonly employed for debt consolidation purposes. The terms that typically come with these credit cards make them an ideal option for people who want to have an easier time fulfilling their financial responsibilities with their creditors. It’s worth noting, though, that not everyone can gain approval for their balance transfer credit card application. People who want to get their hands on such a card must first meet a prospective lender’s strict requirements.
Here are some of the reasons why people find it worthwhile to apply for this financial option.
It Presents Borrowers with the Choice to Consolidate Debt
Depending on the limit of the balance transfer credit card that was granted to you as well as the combined sum of all your existing debts, it’s possible to consolidate your debts under a single credit card. Once this happens, you only have to keep track of a single lender, payment deadline, and interest rate. Having only one debt to deal with will make it much easier for you to stick to your debt repayment plan and make timely payments to meet your financial goals.
Consolidating your debt can also help you gain peace of mind, as you no longer have to deal with multiple reminders from different lenders and debt collectors. Of course, to continue enjoying this particular benefit, it’s a must to avoid incurring more loans, which is something that will take you back to square one.
It Often Comes with Lower and Even Zero Interest Rates
Balance transfer credit cards are more than just a great tool for organizing your debts under one account. These programs have practical repercussions as well. They entice people to transfer their outstanding balances by offering lower–often, even zero–interest rates for the first 6 to 18 months. This is a boon for people who have debts that come with high-interest rates. By signing up for a balance transfer credit card, debtors can exchange their high-interest rate for a low or zero percent one. This, in turn, can help them save money on interest charges and put more funds toward the principal amount.
It’s worth noting, though, that these low-interest rates are often tied to a set of terms that a customer must meet. Failing to meet the said terms can lead to the revocation of the promotional interest rate and can cause higher interest rates to kick in.
There Are Plenty of Perks for Signing Up for a Balance Transfer Credit Card
A lower interest rate that can apply for 6 to 18 months is a perk that one can typically expect upon qualifying for a balance transfer credit card, but it isn’t the only one. Aside from this, there are also cards that waive their annual fees, offer rewards for transferring a certain amount, and provide cashbacks for purchases. Even if you’re primarily getting a balance transfer credit card for debt consolidation, you still have plenty of options at the tips of your fingers. This means that it won’t be any trouble finding a card that is well-matched to your spending habits and financial needs.
It Can Be an Effective Tool for Planning Your Debt Repayment Timeline
Balance transfer credit cards often offer a zero percent introductory interest rate for 6 to 18 months. If you are able to meet your credit card’s terms and complete the repayment process within the said period, then you can maximize the amount that you can save while paying your debt. It’s possible to use this as motivation to complete your debt repayment process in a timely manner. If you’re aiming to enjoy a zero-percent interest rate, for example, you can make consistent payments that will wipe out your debt within 18 months.
How to Maximize the Use of This Financial Tool
Not everyone has the opportunity of being granted a balance transfer credit card, so if you do get one, use it wisely. Before transferring your balance to a different bank or credit card, crunch the numbers first to see if the savings is worth the effort of applying and meeting the requirements of the program.
At the same time, check if you can uphold the terms of the balance transfer card you are applying for or not, as failing to meet your obligations with your new creditor can leave you in deep debt. This way, you know exactly what you’re signing up for and what you stand to gain or lose by making a commitment to transfer your outstanding balance.