Credit card balance transfers can reduce or totally get rid of the interest you are paying on a credit card. By using this option you can reduce your debts and manage your financial situation more efficiently. Before you make a transfer, keep these facts in mind.
Assess Your Credit Card Debt
Go over you credit cards; get the one with the highest interest rate. Before starting a transfer, understand the 0% is an introductory rate. It is good for several months (12 months is the maximum).
Compare the Offers
List all the credit card companies that are making this offer. Make a comparison of the introductory rate, the duration of the 0% offer and max amount that is transferrable. Pay close attention to the rate after the introductory period.
Some companies make up for the 0% offer by implementing high rates afterwards, so make sure the rate is reasonable. Also, some credit card companies have annual and balance transfer fees. Since 2008, most credit card companies have discarded the $75 maximum transfer fee and now use a 3% charge for balance transfers.
Be Aware of Penalties
Penalties are handed out if payments are late or missed. Some credit cards will default to the high rate if you miss on a payment. It is also common practice among store cards to charge the whole accrued interest if the balance is not fully paid by the end of the introductory rate. Before you apply for credit card balance transfers, you must be aware of the potential penalties.
Other Considerations
Go over each offer and decide which can best aid you financially. If there are offers from existing accounts, do the transfer only if there is no more balance on the card.
You may be able to move balances from more than a single card. This will depend on the credit limit however. Always remember that you should do a balance transfer with the card that has the highest rate. Keep making payments until you receive a message the transfer is successful.
Tips
Repeat the steps outlined above to make balance transfers for other cards you have. Do not forget the duration of the introductory rate. Take your time in examining the various offers. It is too easy to be enticed by the low interest rate and fail to notice the penalties and rates to be imposed later on.
How a Balance Transfer Works
Quite simply it relocates the amount owed from one account to another. Two accounts are therefore present: the delivering account (the one with the balance) and the receiving account (where the balance will be transferred).
The company that manages the receiving account will pay the balance from the account that had the balance (the delivering account). Finally, an amount equal to that paid off is placed in the receiving account.
A credit card balance transfer can remove the burden of paying high interest rates on your credit cards. If you are mindful of the length of the rate offer and avoid penalties for late payments, it can be a very effective tool for reducing your debt.
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