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What is a Balance Transfer and What are the Benefits? | Guiding you Forward - YouTube
Channel: Mountain America Credit Union
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- [Krystalina] Hey everyone.
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Welcome to the Guiding You
Forward podcast presented
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by Mountain America Credit Union.
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Today, we're talking
about balance transfers.
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And thankfully we have
Matt Farrow with us.
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Hi Matt.
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- [Matt] Hi, how are you?
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- [Krystalina] Doing so good.
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- [Matt] Good.
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- [Krystalina] And let's
let everyone in on, Matt,
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why you can talk to us about this.
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It's because he's the
assistant vice president
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of Payment and Deposit
Products at Mountain America.
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- [Matt] Correct.
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- [Krystalina] I mean
if we wanna learn about
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balance transfers, Matt's our guy.
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So thank you so much for joining us, Matt.
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- [Matt] Thank you, happy to be here.
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- [Krystalina] Awesome.
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So what exactly is a balance transfer?
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- [Matt] A balance transfer,
it's kind of self-explanatory
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a little bit.
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It's where you take an existing balance
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from one credit card and you
move that over to another
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credit card with a different
financial institution.
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And usually it's for people
that are carrying a balance.
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- [Krystalina] So what
are some of the benefits
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of doing this?
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- [Mark] Commonly people
do a balance transfer
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really when it comes down to rate, right.
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So you're in an existing
card that maybe carries
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a higher interest rate than another card.
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So people will do some
interest rate shopping
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and move an existing balance
that's in a higher rate
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into a lower rate card in an effort
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to try to pay down debt faster.
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- [Krystalina] Okay, and this
is a pretty good strategy
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in order to get out of debt faster?
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- [Matt] Absolutely, yes!
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- [Krystalina] So when
we're rate shopping,
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at some of these different
financial institutions,
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what do we need to be looking for?
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- [Matt] So financial
institutions, back in 2010,
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the Credit Card Act was passed
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and it required card issuers
to be much more transparent
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and consistent in the way
they display rates and fees.
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So every card issuer
will have a disclosure.
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It's formatted very similarly in a box
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so you can see very
clearly what the rate is.
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If there's annual fees,
what the late fees are,
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if there's a penalty for paying late.
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Those are all displayed very similarly
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across credit card issuers.
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So it's important that
people collect those
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and do some rate comparisons
and pricing comparisons on fees
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and things like that.
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- [Krystalina] Cause one
thing I remember, my husband
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and I were looking into
doing a balance transfer.
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It was after we were first married,
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bless our hearts when we were single,
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we maybe didn't care
as much about budgeting
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as we should have.
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Love you, babe. Sorry,
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I'm giving away all our secrets.
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And one thing that we didn't
realize until we were looking
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at the different options is
some of them have annual fees.
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So that was something that we were like,
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"Oh, is it worth the annual fee
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even though the rate,
they're saying is lower?"
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And it ended up not being worth it to us.
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So it was interesting
to just, I don't know.
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- [Matt] A lot of card issuers
that charge an annual fee,
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they'll do it to offset
other expenses that people
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commonly find very valuable.
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So you'll see with some
of the airline cards
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you'll get free baggage check-in
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and additional points when
you purchase airline travel.
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So some of those things
may pay for that annual fee
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but it really just comes down
to a kind of a balancing act.
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Is that really worth the
annual fee that you're paying
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and are you getting the
benefit of the card that,
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to offset that cost.
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- [Krystalina] So really I need
to look at what I'm getting
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and how it's going to benefit me.
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- [Matt] Absolutely.
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- [Krystalina] What other things
do I need to watch out for
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as I'm doing these comparisons
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across financial institutions?
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- [Matt] Sure, I think
introductory rate is a big lure.
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We get these emails or direct mail pieces
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that say 0% for six to 12 months.
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One thing that's really
important to look at
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is what does that rate become
after that promo period.
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Is it up in the twenties?
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Cause that's pretty expensive.
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So if you can find a card
that maybe doesn't have
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an introductory rate but
it has a very low rate
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over the course of the entire
term of the credit card.
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That might be more beneficial
than an introductory rate.
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- [Krystalina] Yeah, that's a good point.
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Or introductory to how long
you can pay your debt off?
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I don't know.
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- [Matt] Yeah, I think that's
a really great strategy
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with an introductory rate.
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If you're going to move it into a card
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because of an introductory rate,
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really take advantage of that period,
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pay as much down as you can
while you're getting a 0%
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or a very low rate, before that rate jump.
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- [Krystalina] Okay, awesome.
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So how do fees come into
play with all of this?
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Are there fees associated
with doing a balance transfer?
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- [Matt] There can be.
A lot of issuers will
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actually give you
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a rebate when you do a balance transfer.
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So you'll see, like I
said, introductory rates,
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you'll see, cash back when
you do a balance transfer,
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but you also have to watch,
is there a different interest
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rate for a balance
transfer than there is just
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for a regular purchase.
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So that that can apply as well
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such as people need to be mindful of that.
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- [Krystalina] Okay, perfect.
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Well, Matt, thank you so
much for joining us today.
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- [Matt] Thank you, it's been a pleasure.
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- [Krystalina] Yeah, and
you guys, we have learned
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all we need to know
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about balance transfers. But
if there's something else
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you do wanna know, you can
head on over to macu.com
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and we will provide a direct
link, so you can learn
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all the things about
balance transfers as well.
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And thank you so much for joining us again
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and we will see you
all on the next episode
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of Guiding You Forward.
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