Understanding credit cards: Balance transfer vs money transfer

What is the Difference Between a Balance Transfer and a Money Transfer?

You may already know that shifting credit card debt from a high interest card over to a low interest one can save you a significant amount of money. But, do you know the difference between a balance transfer and a money transfer? Here is our handy guide to both processes and some top tips to help you decide which one is the most appropriate for your situation.

What is a balance transfer?

Balance transfer – A balance transfer is when you shift debts from an existing credit card to one which has a lower rate of interest attached to it. This can be extremely beneficial if done correctly as transferring debt from a high interest credit card can save you a significant amount of money over the life of the balance. This is because some credit cards involve such a high rate of interest that you may find your monthly payment only services the interest rather than clearing the money you owe. By transferring this balance over to a card with low, or even no interest, can see you chip away at the balance much quicker and bring your overall debt down.

Be aware that there is usually a fee for doing this which is typically a percentage of the amount transferred. Despite this, the fee is often more than outweighed by the savings made on your monthly interest payments. However, you should check carefully the fee attached to the card and the new interest rate to ensure you will be making a saving in the long run.

Top tips for balance transfers and money transfers

Despite the benefits you must do your research before going ahead to minimise unnecessary fees or charges. Whichever route you choose to go down, here are some top tips to help you get the best deal and save you money in the process:

• If you have decided that either a balance transfer or a money transfer is something you want to go ahead with, ensure you seek out the very best rates out there. If you have an excellent credit rating you may be eligible for cards with 0% interest.
• Once the transfer is complete, do not be tempted to spend on the card as this will typically not be offered on the same terms or with the same rate of interest.
• An attractive introductory rate will not last forever, therefore you should make plans to clear your debt before this ends and a higher rate of interest kicks in.
• Ensure you keep up with the monthly repayments. If you miss a payment this will be seen as a breach of contract and you may find your cheap interest rate removed and replaced by your lenders’ standard rate.

If you are struggling with debt and would like professional help and advice, contact Scotland Debt Solutions today. Our expert advisers can help you understand the various debt options out there and put you on the right track towards a debt-free future.