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Understanding Balance Transfer Credit Cards

At O1ne Mortgage, we prioritize consumer credit and finance education. This article will help you understand key terms related to balance transfer credit cards, which can be a useful tool for managing and paying down debt.

Annual Percentage Rate (APR)

Credit cards often have multiple APRs, including those for purchases, balance transfers, and cash advances. A balance transfer offer typically provides a lower APR on transferred balances, sometimes as low as 0% during an introductory period. This can help you pay down debt faster and save on interest.

Promotional or Introductory Period

Balance transfer offers usually come with a limited-time lower APR, known as the promotional or introductory period. This period can last up to 21 months. After it ends, any remaining balance will accrue interest at the card’s standard APR.

Variable APR

Most credit cards have variable APRs that can change based on a benchmark rate. This means the interest rates for purchases, balance transfers, and cash advances can fluctuate, affecting your interest charges and minimum payments.

Balance Transfer Check

Some credit cards provide balance transfer checks, which you can use to pay other credit card issuers or lenders. Be cautious to ensure these are not convenience checks, which could result in a cash advance instead of a balance transfer.

Balance Transfer Fee

Many credit cards charge a fee for balance transfers, typically 3% to 5% of the transfer amount. Some cards may offer lower fees during an initial period, while others, especially from smaller credit unions, may not charge any fees at all.

Annual Fee

Some credit cards have an annual fee, which can be due upon opening the card and on each anniversary. While cards with annual fees may offer perks and rewards, if your goal is to pay down debt, consider cards without annual fees.

Balance Transfer Limit

Your credit card’s credit limit determines the maximum balance you can carry. However, the balance transfer limit may be lower than the overall credit limit. Additionally, some issuers may cap the amount you can transfer within a certain period.

Compare Balance Transfer Offers

When comparing balance transfer offers, look for cards with 0% APR, long introductory periods, and low fees. Your credit score will influence your eligibility and the balance transfer limit. Remember, you generally cannot transfer balances between cards from the same issuer.

For any mortgage service needs, call O1ne Mortgage at 213-732-3074. Our team is here to help you make the best financial decisions.

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