A “balance transfer” or balance transfer can be a good financial decision. It is about transferring the debt from one credit card to another with better conditions.
What is a credit card debt purchase with “balance transfer”?
Sometimes banks start campaigns to increase the number of customers of their credit cards.
One of the marketing strategies they use is to offer to buy the debt you have on your credit cards from other banks. The most important benefit is that the interest rate will be lower or preferential than the one now charged to your cards.
Good business, no doubt.
A lower rate will mean that you will pay less interest on the debt.
How does the purchase of credit card debt work?
Suppose that to date you owe for the purchases and advances requested, a total of $ 2,500 pesos MX and US $ 700. If you never used the card again, the debt would end up paying in twelve months. You could pay it without problems.
But what bothers you is that there are three cards from different entities and with different payment dates. And, there is one that your friends say is “very expensive.”
The solution may be to consolidate the debts of the three cards into one, a purchase of credit card debt.
The clearest feature of this credit card is its two lines of credit:
- The parallel credit they give you to pay off the debt you already have with other cards.
- The limit or line of credit for purchases and withdrawals.
Each month, in the account statements, you would see the two charges: what you have to pay for the debt and what you owe for your consumption.
Conditions for the user
The decision to accept the new card (or a line parallel to the revolving line of the credit card) will be a good financial decision if:
- The interest rate is effectively lower than those of your current card. In your statement you can see at what rate you are paying for purchases and availability of cash.
For example, at this time, preferential rates fluctuate between 7.3 %% and 9.5% annual cash (they expect interest rates to fall in Mexico for the first time in 5 years). Those on your card can be in the order of 27% to 100% (some up to 151%) annual cash for purchases and 55% to 99% for cash advances.
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- The charge for the transfer (the payment of the debt) is justified, when doing the evaluation of the interests.
- As a general rule, the bank will not consolidate credit card debts that are past due or overdue.
- Nor to people with a central rating of “poor” or “loss” risk, because it has shown poor financial behavior.
- The debt money will not be consigned to your account, it will be paid directly to the bank with an interbank transfer.
- The term to pay the debt will be 12-48 months (or less if you pay more money than indicated as a minimum payment).
Requirements for the purchase of credit card debt
The bank will proceed quickly with the approval process.
- Fill out the request.
- Deliver copies Official Identification (IFE) or Passport
- Update financial information (income)
- Update work information (demonstrate stability between 6 and 12 months)
- Account statement of credit cards
- Have a good rating in the risk centers