Financial Fitness

Could You Benefit From a Balance Transfer?

Connections Q3-2017 Unitus Balance Transfer

Do you carry balances on one or more credit cards? If you do, a balance transfer could save you money. It can simplify your monthly payments, consolidating them into a single account, and even help you get out of debt faster.

But be careful – before you accept an offer, there are some things you should consider to when deciding when a balance transfer makes sense for you.

What Are the Benefits of Balance Transfers?

1) Saving money

If you’re carrying balances on credit cards and paying interest every month, a balance transfer could save you a significant amount of money.

Say you have a balance of $10,000 on a credit card with 24.99% APR. If you transferred balances to a card with a 12-month 2.99% introductory APR, you could save more than $1,200 in interest in one year!

2) More money for other expenses

First, you’ll be able to pay down your credit card debt more quickly because more of your payments will be put directly to the principal, rather than paying interest.

Next, if you have money left over after clearing your credit card debt, you can begin paying down your other debts more quickly. When you can pay down the principal earlier in any loan, these savings on interest payments really add up in the long term.

Did you know one of the perks of the Unitus Platinum Rewards Visa is that you can use your Rewards points to pay down principal on any Unitus loan?

3) Consolidate your payments

If you have multiple credit cards, a balance transfer could save you from having to make multiple payments each month, simplifying your payments and giving you less to keep track of each month.

4) Better terms and rewards

When you transfer balances to a new credit card, your new card could offer you better terms (having no annual fee is nice for the wallet and peace of mind, and if you have trouble keeping deadlines, having no penalty rate for late payments can be a lifesaver).

Then there are rewards perks, which differ by card. They can include cash back, gift cards, travel, live experiences and more. Each of these terms and rewards are offered with the Unitus Platinum Rewards Visa.

Things To Look Out For

1) How long does the introductory rate last?

Remember that a balance transfer generally offers a very low introductory rate, but only for a certain period of time (often 6-12 months). After this grace period, the rate will reset at the regular rate.

Make sure you are aware of the timing and the new rate. Try to pay off as much as you can during the low-rate introductory period. A lower rate can make a huge difference in your savings.

2) Watch out for the balance transfer fee

This is a one-time fee you might have to pay when you transfer a balance to a new card. Sometimes this fee is waived – for example, Unitus’ current balance transfer offer does not charge a fee.

However, the fee is usually a percentage of the balance you’re transferring (often 3%) and that can add up. For example, if you transferred a $10,000 balance, the 3% fee would be $300 extra you’d have to cover.

3) Your credit score will lower (temporarily)

When you apply for your new credit line, there will be an “inquiry” on your credit report which will temporarily lower your credit score. Although your score might take a slight hit now that you have a lower average “age” of revolving loan, this will be offset by the fact that if used wisely, your new card will lower your “utilization rate” which will boost your credit score! Learn more about the ins and outs of credit here.

4) Be careful if you have a high balance

While a balance transfer can be very effective at reducing moderate balances, if you have a high balance (for instance, around $15,000 or more) there may be better options to help you pay down your debt.

Contact our Member Loan Center at 503-423-8770 to speak with an expert and figure out the best choice for your financial goals.

5) Don’t stop making payments!

Transferring to a card with a low rate for a year doesn’t mean you can stop making payments. If you fail to make a minimum monthly payment, you will lose the low introductory APR and may also have to pay a penalty fee based on the credit card.

6) Here’s the best way to approach a balance transfer

If you have balances on one or more credit cards, get a balance transfer that offers:

  1. A low introductory APR
  2. A good length of time under the introductory APR (12 months or more)
  3. Low or no balance transfer fee

Check that your new credit card meets these standards and the ones described in the “Benefits” section (our Platinum Rewards Visa is one).

Once you’ve transferred your balances, be sure to continue paying off at least as much as you were before. With the new lower rate, it will feel great to see that even paying the same monthly payments as before (and ideally adding more to each payment) will lower your balance faster!

Try to pay off the balance in full before the introductory period expires. When used this way, the balance transfer can be an immensely helpful tool in improving your long-term financial health.


Posted By: Jacob Schnee

About the Author: Jacob joined Unitus as Marketing Specialist in March 2015 and transitioned to Marketing Communications Specialist in March 2017. His experience has spanned hospitality, business development, consulting, and marketing in various industries along the east coast, west coast and in between. When he is not developing internal and external communications for Unitus, he is engaging in recreational fitness, studying personality types and exploring the outdoors with his wife and dog.

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