How the Barclaycard® Ring MasterCard® Reduces Your Interest Payments
Interest is the financial phenomenon that keeps you in credit card debt. So, it is crucial to avoid it as much as possible.
Understandably, it is difficult for many people to pay off all debt at once, which is why the Barclaycard® Ring MasterCard® deserves a mention. The card’s benefits get you on a path towards a debt-free life, mostly due to its no-fee balance transfers and low APR.
What are balance transfers?
Balance transfers allow you to pay off one card’s balance by borrowing against another credit card, hence the transfer of the balance. They can be used to turn high-interest debt into low-interest debt. They can help you push balances to 0% intro APR credit cards. But, typically, the credit card receiving the balance transfer will charge a balance transfer fee of about 3% of the transferred amount. Certain credit cards may waive the fee during a promotional period or permanently.
So, free balance transfers -- a rare perk found with the Barclaycard® Ring MasterCard® -- open doors to a little financial creativity.
We show you a few ways that the card can be used to cut down on your interest payments:
1. Debt consolidation
What you’re doing essentially: Use free balance transfers to consolidate debt under a low APR.
Got a disturbing amount of high-interest credit card debt? Here comes the Barclaycard® Ring MasterCard® to save the day. Rather than paying interest at those high rates, simply consolidate those balances through the Barclaycard® Ring MasterCard®. You won’t be paying interest at whatever the APR may be on your other credit cards. The larger your balance, the bigger the difference in savings from lower interest charges.
Additionally, there’s the side benefit of having just one credit card bill to manage. As a fan of minimalism, especially when it comes to personal finances, I believe that having a single payment is conducive to successful debt reduction.
Okay, admittedly, this “tip” is very much a no-brainer for a credit card that never charges balance transfer fees. But, it’s worth mentioning because so many people only use balance transfer credit cards to delay debt repayment. It involves transferring a balance to a new credit card with a 0% introductory APR. Unless the intro offer included free balance transfers, you would be stuck with a balance transfer fee. A vicious cycle ensues when you’re only making the minimum payment and racking up balance transfer fees. Meanwhile, interest continues keep you swimming in debt.
Don’t try to delay the inevitable. Consolidate your debt with the Barclaycard® Ring MasterCard® and make a solid effort to eliminate debt (not hide it inside some imaginary sock drawer).
2. Enjoy rewards at a low APR
What you’re doing essentially: Disregarding the high interest rates on your rewards credit cards.
If you didn’t know already, credit cards that offer rewards will often carry a higher interest rate. You’d be hard-pressed to find a card that can dole out generous rewards alongside a low APR -- especially difficult to find with travel credit cards.
With the Barclaycard® Ring MasterCard®, that reality is possible.
You’d spend as you would with an existing rewards credit card and then transfer your balance to the Barclaycard® Ring MasterCard® -- for free. You can disregard your rewards credit card’s interest rate because the 8% APR on the Barclaycard® Ring MasterCard® is what ultimately applies to that balance.
Sure, I would normally say that you should not be wielding a rewards credit card if you’re going to carry a balance. Ideally, you're paying off your credit card balance in full from month to month. But, in the event that you have to do so, you’ll have the Barclaycard® Ring MasterCard® to minimize the amount of interest that you’d have to pay.
Interest kicks in immediately for balance transfers
One major caveat of balance transfers is that the interest begins accruing on the transferred balance as soon as it is posted onto your account. It is different from the balance that comes from a purchase. With purchase balances, you have a grace period is at least 21 days from the time that you receive your credit card statement. Pay off the balance within that grace period and you won't be charged any interest.
Without such a grace period, interest is charged on balance transfers immediately. The only exception would be if you had some promotional 0% APR on balance transfers. Normally, a balance transfer takes roughly 7 to 10 days to complete. A credit card issuer may choose to reject a customer's balance transfer request if it suspects any kind of abuse or fraud. It may also limit the size of balance transfer.
The table below contains various scenarios that show how different balances can have different interest rates:
|Credit Card Interest Rates||15.99% APR on Purchases, 0% APR on Balance Transfers||0% APR on Purchases, 15.99% APR on Balance Transfers||15.99% APR on Purchases, 4.99% APR on Balance Transfers||15.99% APR on Purchases, 15.99% APR on Balance Transfers|
|Interest Charged on Purchase Principal||$65.71||$0||$65.71||$65.71|
|Balance Transfer APR||0%||15.99%||4.99%||15.99%|
|Balance Transfer Principal||$5000||$5000||$5000||$5000|
|Interest Charged on Balance Transfer Principal||$0||$65.71||$20.51||$65.71|
|End of Month Principal Owed||$10,000.00||$10,000.00||$10,000.00||$10,000.00|
|Total Interest Charged on End of Month Principal||$65.71||$65.71||$86.22||$131.42|
|End of Month Balance Owed||$10,065.71||$10,065.71||$10,086.22||$10,131.42|
|Total Monthly Payment||$500||$500||$500||$500|
|- Portion of Monthly Payment Toward Lowest-APR Balance||$165.71||$165.71||$186.22||$231.42|
|- Portion of Monthly Payment Toward Highest-APR Balance||$334.29||$334.29||$313.78||$268.58|
|New Purchase Principal||$4,731.42||$4,834.29||$4,751.93||$4,815.71|
|New Balance Transfer Principal||$4,834.29||$4,731.42||$4,834.29||$4,815.71|
|New Total Balance||$9,565.71||$9,565.71||$9,586.22||$9,631.42|
3. Skip out on 21 to 25 days of interest
What you’re doing essentially: Gaining the privilege of an interest-free grace period. (Applies only if you perform the balance transfer at the end of the grace period.)
Having to incur interest charges is the worst part of carrying a balance -- it is inevitable. But, with the Barclaycard® Ring MasterCard®, you can dodge at least 21 days of interest charges!
Again, when you pay off a balance with a balance transfer at the very end of another card’s grace period, that balance did not accrue any interest. Interest is not charged on purchases when balances are paid off in full by the due date. Your other card’s balance was technically “paid off” by the balance transfer. So, no interest accrued.
However, if you didn’t pay off the other card’s balance and you held the balance on the other card, you would have accrued that 20 to 25 days’ worth of interest.
In fact, Barclaycard® Ring MasterCard® cardmembers have the ability to connect their other credit cards so that they are alerted to the due dates of these other cards. You would be offered the option to perform a balance transfer.
How much interest can you avoid realistically? It may not look like much, but it matters in the long run.
I’ve made a chart to show examples of how much interest you would have paid during the grace period (the same amount you would have avoided with a free balance transfer):
|Balance||APR||Daily Interest||Interest accrued over 25 days|
Once more, this neat little trick has a greater impact if you have a high balance and/or high interest rates.
With the many ways that the Barclaycard® Ring MasterCard® can help you cut down on interest payments, it’s no surprise that it is also topped MyBankTracker’s list of best low-interest credit cards.
Avoid a late fee or hit to your credit
Not only can a balance transfer help you to skip out on nearly a month of interest charges, it can also come in handy if you are ever in a dire financial situation that prevents you from making the minimum payment on a credit card. You can perform a balance transfer as a "payment" without missing the payment deadline. If you don't know already, a missed payment could result in a late payment fee (as much as $35) and a negative record on your credit report.
A late payment record has the potential to cause significant damage to your credit score. This drop in your credit score can hurt your chances of qualifying for new loans and line of credit. And, if you do qualify, it is likely that you'll face an high interest rate, which means you're paying a lot more money on your loans.
How a Balance Transfer Affects Your Credit Score
One possible concern you may have regarding a balance transfer is how it might affect your credit score. The actual transaction of a balance transfer will not have a major effect on your credit score. In the end, the amount of total debt owed is still the same.
There could be an impact, however, if you decide to close an account after you've transferred the entire balance out of it. Firstly, the age of the account stops growing so your credit score won't be increasing as quickly as it should be. The biggest effect would come from the loss of the credit line.
A large part of your credit score is made up of your debt utilization ratio. It is calculated by dividing your total debt by your total combined credit limits. When you close an account after transferring a balance, your combined credit limits will decrease. Therefore, it appears as if you're using more of your borrowing potential -- your credit score will experience a drop. Ideally, your debt utilization ratio should be less than 30%. If you're about to apply for a major loan, you might consider keeping the account open until you've already qualified.