Common Terms for Balance Transfer Credit Cards
Balance transfer credit cards are becoming increasingly popular in the credit card sector, as many individuals are searching for easy ways to consolidate their higher-interest credit cards into one, easy-to-manage credit with a lower interest rate.
However, balance transfer credit cards may be a bit more confusing to understand, based merely upon the fact that the entire balance transfer process will vary greatly from one credit card to the next. Because of the differences in terms and features between balance transfer credit cards, it is important to thoroughly read the cards’ terms and conditions.
And in order to understand the balance transfer credit cards’ terms and conditions, you must first have a good understanding of the terms commonly used:
- Annual Percentage Rate (APR) – The APR is essentially the cost of using the credit card; it is commonly expressed using a yearly interest rate. The credit card company simply charges a fraction of the annual rate (for every 30 days) when figuring out the finance charges on the outstanding balance. This calculation is often referred to as the “periodic rate.”
- Balance Transfer – Balance transfer is essentially the process of transferring debt from one credit card account to another.
- Balance Transfer Fees – Many balance transfers come with a fee that is charged by the credit card company for completing a balance transfer request. The balance transfer fee is either a flat fee or a percentage of the balances transferred.
- Credit Limit – A credit card’s credit limit is the maximum that you can borrow on a credit card.
- Default APR – The default APR on a credit card is an APR that is imposed by the credit card company when a customer fails to uphold his or her credit card agreement. Default APRs can be imposed on customers who fail to pay just one of their credit card payments on time.
- Introductory APR – Many balance transfer credit card offers come with an introductory APR, which is the APR that is charged during the introductory period. Once the introductory period has ended, the credit card company will change the APR.
- Purchase APR – The purchase APR will be the APR imposed for purchases; this will often differ from the introductory period for the balance transfer APR.
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