Paying off more than one high-interest credit card balance is an overwhelming and financially draining process. Luckily, there are effective ways to easily manage this daunting task. A balance transfer credit card is a good way to consolidate all your debts into a single account with a lower interest rate. This method simplifies payments and will potentially reduce the total amount of interest you’ll end up paying.

This blog highlights all the hows and whats of balance transfer credit cards. Read on and discover what they are, how they work, and the benefits you’ll get once you avail of one.

What is a Balance Transfer Credit Card?

A balance transfer credit card allows you to move existing balances from one or more accounts to a single card that offers a lower interest rate. This method will enable you to focus a larger portion of your income toward the actual debt instead of interest charges. This is useful especially if your existing credit cards have higher interest rates.

Another upside to this is the convenience since managing a single payment each month will make it easier for you to avoid late fees and missed payments.

How Do They Work?

Once your balance transfer has been approved, the issuer of your balance transfer credit card will pay off your existing debts to your other creditors. The total amount is then transferred to your new card, with terms that often provide a lower interest rate over a specified promotional period.

Benefits Offered by a Balance Transfer Credit Card

Now that you know what a balance transfer credit card is and what it can do for you, it’s time you find out how this arrangement can benefit you and your savings goals.

Lower Interest Rates and Debt

In the Philippines, balance transfers can normally reach as low as 2% and even lower if there are available promos. Credit cards, on the other hand, can go as high as 3%. This might not seem like a huge difference, but lower interest rates translate to more of your payment reducing the actual balance, letting you pay off your debt faster.

Simplified Payment Process

Managing multiple credit card balances is an overwhelming task, especially when each card has different due dates, interest rates, and minimum payment requirements. Consolidating all of your debts into a single account will streamline the payment process, improving your financial management and reducing the risk of missed payments.

Better Financial Discipline

Balance transfer cards usually come with structured installment plans, allowing you to set a clear and achievable timeline for paying off your debt. Not only will this instill financial discipline, it will also help you regain control of your finances easier.

Potential Boost to Your Credit Score

Making payments on time and reducing credit utilization can help boost your credit score, making you a trustworthy individual in the eyes of potential lenders. A good credit score can also help you get better interest rates on loans and breeze through credit card applications faster.

Extra Disposable Income

Lower interest rates not only help you pay off your debt faster, they can also free up extra funds for other expenses like utilities, rent, food, and water. In other words, you’ll get extra wiggle room to spend more on your needs and your wants.

Things to Consider Before You Choose a Balance Transfer Credit Card

In order to maximize the benefits you can get from a balance transfer, you need to evaluate your options and consider the following:

• Balance Transfer Rate. Since lower interest rates are one of the main benefits of these cards, seek out the ones that offer the lowest interest rates. There are some banks that even offer promotions with zero percent interest rates.
• Fees and Charges. Consider any processing and annual fees. Some credit cards even offer no annual fees! Also check their penalty fees for late payments or early repayments.
• Promotional Period Duration. It’s important to make sure that the promotional period is long enough for you to pay off a significant portion of your debt.
• Post-Promotion Interest Rate. Be aware of the interest rates that will apply once the promotional period ends, since it might end up being higher than your original card’s rate.
• Convenience. Some credit cards are more complicated to get than others, with a long list of requirements and a longer waiting time. In these cases, you should find out which credit cards are the easiest to get.
• Credit Score Requirements. As we’ve mentioned before, individuals with higher credit scores will get better interest rates and the best offers. Be sure to check your eligibility before applying.
• Impact on Credit Score. Since applications to balance transfer credit cards will require a credit inquiry, you can expect your score to take a temporary dip. But fret not, as long as you keep making timely payments and stick to the plan you’ve set out, your score will eventually improve.

Your Options in the Philippines

We’ve curated a few options for you to consider when looking for the right balance transfer credit card:

• BPI
  • Interest Rate: As low as 0.49%*
  • Installment Terms: Flexible terms from 3 to 60 months
• Metrobank
  • Interest Rate: As low as 1%
  • Installment Terms: Options from 6 to 60 months
• BDO
  • Interest Rate: As low as 0.42%*
  • Installment Terms: Up to 60 months

*These rates are promos and are subject to change without prior notice. Please check the bank’s website for further details.

Learn Everything You Need to Learn About Credit Cards

Getting a balance transfer credit card is a very useful approach to manage and reduce your credit card debt. By choosing the right card for your needs and using it responsibly, you can simplify your finances and free yourself from debt. Compare features, fees, and the available terms to find the best credit card option for your financial situation and needs.

Cards.ph is a blog dedicated to helping Filipinos learn more about the benefits of credit cards, as well as providing insight on the best deals available out there. If you’re looking to apply for beginner credit cards, or simply find information to make informed decisions, explore our blogs further!