Just like it sounds, this is when you transfer the balance of your current credit card to another. Imagine you’re moving your debt from one card, often with a high interest rate, onto a new card that has a lower interest rate.
It can be a strategic move to manage debt more efficiently and potentially save on interest costs.
What are the benefits of a credit card transfer?
There are a few reasons to consider a credit card transfer:
Reduced Interest Rates: In most cases, credit cards offering balance transfers come with low or zero interest rates for a specified introductory period. This allows you to pay off your debt faster since more of your payments go towards the principal and less towards interest. If you’re feeling squeezed by interest on your business credit card and struggling to get on top of payments, a balance transfer may give you some breathing room.
Consolidating Debt: If you have multiple credit cards, transferring balances onto one card can make managing your debt simpler. One card, one payment date.
Rewards and Perks: Some cards offer benefits such as points, cashback, or other rewards. By transferring your balance, you could qualify to take advantage of these perks. The card could also offer a lower interest rate than your current provider, even after the introductory period has finished.
What you should know before making the transfer
Before you jump in, be aware of a few things:
Transfer Limits: There might be a limit on how much of the balance you can transfer. For example, some card providers only let you transfer up to 80% of your available credit limit on the new card. So, if your new card has a limit of $10,000 NZD, you’d only be able to transfer $8,000 NZD, even if your balance on the old card is higher. Some credit cards may also have a minimum amount you can transfer.
Post-introductory Rates: Remember, low or zero-interest rates usually apply only for a limited period, and you need to be aware of the rate once this period ends. Let’s say you’ve transferred a balance to a card offering a 2% interest rate for 6 months, and after this period, it hikes to 19%. If, after the 6-month period, you still had a balance of $3,000 NZD, the higher interest rate would apply to this remaining amount.
Balance Transfer Fees: Always check if the credit card provider charges a fee to transfer your balance, often calculated as a percentage of the amount you’re moving.
Impact on Credit Score: Applying for new credit can temporarily lower your credit score, although this impact typically reduces over time if you consistently make payments on time.
Prioritise Payoff: Make paying down the balance you’ve transferred a priority, otherwise you could find yourself in the same position before the transfer — struggling with interest.
How to find the best credit card balance transfer
Finding the right card involves doing your homework:
Decide what you need: Different cards suit different needs. Are you after low rates, rewards, or a combination of both? Compare options: Don’t just settle for the first card you see. Check out multiple providers and compare their features, fees, and interest rates. Read the fine print: Make sure you understand the terms and conditions before signing anything. Know when your introductory rate ends and what it will increase to.
If you manage your payments and prioritise getting your debt paid off, a balance transfer could potentially save you hundreds or even thousands in interest.
However, this is a tool for a short-term solution, not ongoing business credit concerns. It’s important to have a plan for paying off your balance within the introductory period to avoid high interest rates later on.
Compare Business Balance Transfer Credit Cards
There are balance transfer options to assist getting short term company debts under control