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Balance transfers allow the consumer to take the balance from one credit card, and apply it to another credit card that comes with more favorable terms and lower interest rates. Balance transfers can be a convenient way to repay the debt directly to the principal, rather than making payments towards skyrocketing interest rates of credit cards.
There are many advantages to balance transfers. There are many introductory offers available through multiple credit cards that allow the consumer to transfer funds from a credit card that is reaching the limit and has a high interest rate to a card that can have a zero percent interest rate for up to twelve to eighteen months.
Taking advantage of these introductory offers can save hundreds of dollars per year in interest costs of the credit card, but there are certain aspects which should be taken into account when considering a balance transfer for your credit card.
- What fees are associated with the balance transfer? Most companies charge a flat fee aside from the 3% of the balance that is being transferred to the new card. This amount is than added to the balance that is transferred.
- Be sure to make payments throughout the entire period. If payments are missed, or even late it can mean that the interest rate is going to increase from 0% to upwards of twenty percent in some cases.
- How long will it take you to repay the debt? If you are unable to repay the debt in the term that is free, considering finding another method to repay the credit card debt.