Everything you need to know about Balance Transfers, and paying off debt (Pt.3)

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Here’s the Video Transcript:

Oh are we filming Oh today and ask us and Harlee we’re talking about everything you need to know about balance transfers so this is really high talked about subject so I’m gonna skip all that junk about subscribing to my channel and liking my video even though like this video and even though you should subscribe this channel we’re gonna jump straight into the topic of balance transfers and how you can use them to quickly boost up your score and for long term purposes to boost up your score and ultimately pay down debt in order to boost up your score but are these credit hacks really going to work well of course they’re gonna work what you mean then I’m gonna need some proof [Music] so to start off I want to give a quick background about what a balance transfer actually is so the concept is very simple it means transferring debt from one revolving line of credit to another revolving line of credit usually for a very small fee or upfront costs of around three to five percent so credit hack number one and this is really not even a hack but the concept is very simple you have multiple different credit cards and they all report out to the credit bureaus at different times of the month we talked about it in all my previous videos that you have a minimum payment due date that’s when the statement cuts and that’s when that financial institution reports out to the credit bureaus so the process is very simple let’s say you have two credit cards one is completely empty meaning you have a full credit limit available and the other one is completely maxed out and let’s just use both limits as a simple purpose for this video at $1,000 so the hack is very simple it’s in order to trick the credit bureaus to reflect that both the credit cards are completely paid off now this will only work if your minimum payment or your statement cuts at different times of the month so for example let’s say in the first of the month the thousand dollar balance gets reported out so what you want to do is do a balance transfer to the card that has a $0 balance and then now on we’ll review reported out later on so the statement cuts on the thousand dollar balance one after you transferred the balance over shows that you have it completely paid off and then for that time being until the next credit card your other one that a zero dollar balance but now has a thousand dollar balance from a balance transfer until that one gets reported out your credit score is gonna get quickly boosts it up because it’s gonna show that both credit cards are completely paid off so when would someone actually use this credit hack well we can talk about times where you want to get a proof for a car loan or a credit card but maybe your debt to income ratio is too high maybe it shows that you’re revolving balances are too high to the limit on credit cards in order for you to get approved so you can go do this balance transfer hack and then simply go back reapply it will show that you have both credit cards paid off now this is pretty advanced to do because you need to make sure that the statements cut at a far enough distance from the me like maybe they’re the one with the balance that you’re transferring out of cuts on the first and maybe the other one cuts on the 30th to actually make it make sense but there is a cost there is an opportunity cost to doing this improvement and the opportunity cost is that when you do a balance transfer in general sometimes they charge you in upfront fee and that can usually be three to five percent if you have a larger balance let’s say of $10,000 three to five percent may cost you a lot of money so it might not be worth it to answer some commonly asked questions there is not a specific credit card that you need to apply for for a balance transfer it just has to have that offer on the table in other words the credit card is not labeled as a balance transfer credit card the institution just has that credit card and offers you a balance transfer because all of our credit profile is public and they probably saw that you’re holding a higher balance in another credit card and thus they’re offering you to transfer the balance over to another one now the process is very simple you can simply write yourself a check sometimes you get in the mail one of those little labels with a check already printed with your name on it you simply just write the balance that you want to deposit from that payoff from that credit card and it simply just transfers over the balance to the new credit card other ways you can do it electronically you can go into the bank talk to the banker and apply to that so what are other ways that you can use a balance transfer to your advantage to skyrocket your credit score well a great way is to even out debt across the board so as we know one of the biggest factors your credit is your utilization rate so if you have a thousand dollar limit and you’re consistently maxing it out at $1,000 in pain even if you’re paying it back in full it still shows that you utilizing a hundred percent of your credit line in your solely reliant on your credit and that looks very bad to the credit bureaus and it drags your score down so what you can actually do is if you’re holding a balance on safe that thousand dollar credit card bonus ringing great this is Austin cool we’re back so what you can do is if you have a balance of the thousand dollars in the other credit card you can transfer half of it over to the other other credit card and that way you both have a utilization rate of 50% versus 100 percent showing that you’re solely reliant on that credit card it will actually boost up your credit score a few points now it’s always gonna be better just to completely pay off the debt and really where the catch comes in with the balance transfer to really skyrocket your credit the highest is gonna be by applying for a new credit card with a new credit limit for a 0% interest balance transfer now what this is is you probably get these offers in the mail if you have higher balances so what it means is you’re gonna pay that still that upfront fee of around three to five percent and it’s usually listed on that label on the ticket item in the mail that you get open so when you scroll down to the fine print over here it kind of gives you an overview of what the credit card consists of and I would actually go to the main site I will go to Capital One’s site before but it says there is no APR balance transfers but that’s pretty normal for travel roller cards again this needs it excellent credit in order to get approved if we go to a different credit card let’s just say we go back really quick let’s just say we go to this one check out the Wells Fargo credit card more info so you get 0% for eighteen months or in transaction fee balance transfer fee right here oh where is it Blair no assume in so balance transfer fee this is what I want you to pay attention to focus come on for 18 months than five percent so even though these credit cards have this offer for zero percent interest rate for eighteen months they have an upfront fee and again credit need excellent so you need to explore around there’s not going to be one institutions fit every single one of you out there because each of our credit profiles are completely different and you pay that three to five percent and once you do the balance transfer you have that new debt listed under that new credit card line with a zero percent interest so typically when you were paying let’s say on a thousand dollar line of credit and you were just making the minimum payment of like thirty five bucks every month I believe the nationwide average interest rate on a credit card is somewhere around eighteen percent maybe even higher but credit cards are ridiculous remember credit cards are not meant to carry balances so that’s why you would want to do this by paying off debt so you transfer over the balance and instead of having that interest basically kick back up higher than the amount that you actually pay you’ll never pay it off literally you can have it on a zero percent interest and at that point it basically becomes a loan because every time you pay 35 dollars it’s reduces to balance thirty-five dollars and you won’t have to worry about it cuz you’re gonna pay off in a set time now the risk with this the danger in it’s just like Dave Ramsey says the moral of the story is this when people do debt consolidation or balance transfers the danger is you feel like you did something and you didn’t $1200 doesn’t fix this problem so 90% of you getting out of debt as you getting on a plan the danger in paying down debt is that the problem isn’t the interest rate just like he says it’s not the interest rate it’s the mentality of actually setting up a budget to pay down credit card debt you should always start off with the with the smaller balance first now everyone is different there’s no right or wrong basically you need to just pay it all down but this psychology behind paying down something with a smaller balance means that you’re gonna be accomplished and feel like you hit a milestone once you pay that balance off and you’ll be more excited to tackle the next largest balance it’s not about the total amount of debt it’s about getting on a plan in order to pay down credit cards but the point is that you need to be very diligent when you do this and the reason why I say that is because why would the financial institution offer a zero percent interest rate for eighteen it’s because it’s proven in history that the way our minds work as humans with that means that our financial status will not change in 18 months thus they’re gonna charge you the entire 18 months of interest that you would have had 0% free had you would paid at all so guys with that being said the main drawback of doing a balance transfer is that usually people with relatively high credit card balances won’t get a proof for the new credit card and that’s just being real about it because when you have revolving lines of debt that are very high other institutions are very unlikely to approve you for new credit cards so does this credit hack work is it worth doing a balance transfer it really boils down to what your exact credit profile looks like and if you have a question about that leave it in the comment section below and I’ll do my best to get to your exact personalized questions so that I can help you and point you in the right direction so I hope I taught you something new in this video if you’d like to give it a thumb and if you haven’t already going to subscribe mainly because it’s free and because I make financial and real estate videos for everybody to increase their credit score or become more knowledgeable no matter what situation you’re in no matter where you stand financially alright guys I’ll catch you in the next video [Music]

Read More: 10 Things Your Parents Didn’t Tell You About Personal Finances

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