Balance transfer

Balance transfer

A balance transfer is the act of transferring debt from one credit card to another assuming the newer card has better terms and rates. The balance transfer offer consists of three elements: "offer rate, offer duration," and "transaction fee". There are usually three types of offer by rate and duration: "purchase rate, teaser rate", and "fixed life of loan" ('life of balance') "rate".

* Purchase rate offer: The transferred balance will be subject to same rate as the card's purchase (merchandise) rate. Occasionally the same terms will apply as to purchases that may be interest free until the payment date for the statement on which the transfer appears. More often such transferred balances move immediately to the full purchase rate.

* Teaser rate offer: A very low rate for a limited time. The 0% rate is the most common when a new credit card account is opened. The duration of teaser rates vary from (typically) 6 to 15 months, after which the remaining transferred balance is subject to purchase rate. Failure to ensure the account is current (payments made on time) may result in the withdrawal of the offer rate.

* Fixed Life of Loan rate offer : A low rate that is fixed until the transferred balance is paid in full. This type of offer is usually guaranteed only as long as the account is current (see Teaser rate). Whilst this allows the borrower to save interest on their existing debts without the need to initiate further balance transfers once a teaser rate offer expires, the fixed offer rate is higher than the limited duration teaser rate offer. (Typically, it may be between one-half and two-thirds of a fixed rate, fixed term personal loan)

An order of payments for every credit card specifies which balance(s) will be paid first. In nearly all cases payments apply to lowest-rate balances first - highest-rate last. Any balance under a teaser rate or fixed rate will be paid off sooner than any purchases or cash advances (which usually have the highest APR). By avoiding making purchases or taking cash advances altogether, the borrower can ensure they maintain the full benefits of the original balance transfer.

Many balance transfers are subject to a transaction fee. This varies from (typically) 1-5% of transferred debt - sometimes with a maximum capped amount, but otherwise an uncapped percentage.

Wikimedia Foundation. 2010.

Игры ⚽ Нужен реферат?

Look at other dictionaries:

  • balance transfer — UK US noun [C] ► FINANCE a situation in which debt on a credit card is moved to a different card, usually to get a better interest rate: »The way to refinance credit card debt is through a balance transfer. »balance transfer rate/offer …   Financial and business terms

  • balance transfer — noun A transferal of the current amount owing on one credit card to another one (ideally one charging a lower rate of interest) …   Wiktionary

  • Credit card balance transfer — A credit card balance transfer is the transfer of the balance (the money) in a credit card account to an account held at another credit card company.[1] Contents 1 Overview 1.1 Normal rate …   Wikipedia

  • Credit Card Balance Transfer — The transfer of all outstanding balances from one credit card to a new credit card. Credit card balance transfers are typically used by consumers who want to move their debt to a credit card with a lower interest rate, fewer penalties or other… …   Investment dictionary

  • transfer fee — ➔ fee * * * transfer fee UK US noun [C] ► FINANCE a payment that you make when you move a balance (= the amount that you owe) from one credit card to another. You make the payment to the issuer (= bank, etc.) of the card to which you move the… …   Financial and business terms

  • balance — the amount of money remaining in an account. The total of your money in the bank after accounting for all transactions (deposits and withdrawals) is called a balance . Glossary of Business Terms A division of a Securities Account, of a type… …   Financial and business terms

  • transfer — A change of ownership from one person or party to another. Bloomberg Financial Dictionary On the London Stock Exchange, the form signed by the seller of a security authorising the company to remove his name from the register, and substitute that… …   Financial and business terms

  • Balance of payments — In economics, the balance of payments, (or BOP) measures the payments that flow between any individual country and all other countries. It is used to summarize all international economic transactions for that country during a specific time period …   Wikipedia

  • Balance of trade — Cumulative Current Account Balance 1980–2008 based on the International Monetary Fund data …   Wikipedia

  • Transfer of Mortgage — A transaction where either the borrower or lender assigns an existing mortgage (bank loan to purchase a residential property) from the current holder to another person or entity. Homeowners who are unable to keep current on their mortgage… …   Investment dictionary

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”