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What is a Credit Card Balance Transfer?When you have mounting debt, applying for a new credit card may seem like the last thing you should do.
However, if you can acquire a credit card that has a 0% or lower interest rate on balance transfer, applying for a new credit card could be the smartest thing you do. Credit card companies make their profit from the finance charges they charge you monthly, with the average being approximately 16%, making it nearly impossible to pay down the debt, especially if you only make the minimal payment. However, to attract more business, many credit card companies use what is know balance transfers. Which is actually great for the consumer. Many credit card companies offer these low or 0%
interest rates for a very limited time ranging from only 6 months to a very rear 18 to 24 month period after the balance transfer takes place. Still fewer offer the low introductory rate for the life of the original balance. This means that once you make a new charge that new purchase will be subject to the APR the card offers. Savvy consumer, can use balance transfers to actually reduce their amount of credit card debt. By not having to pay as much towards the
interest, the person can actually pay down the balance on a credit card. Using this strategy, the person could potentially open new accounts each time the introductory period expires. The danger here is that they will not establish a long-term credit history, which could lower their FICA score. You also want to make sure that you close your old account immediately as having too many open credit card accounts may damage credit scores. In addition, it lowers the risk of you using that
card getting further into debt. To make balance transfer work for you requires diligence on your part. This means you must read the fine print attached, which will reveal any hidden charges. Many banks charge a transfer fee, which can be a percentage of the balance transferred. You want to make sure that there is a cap on this amount, or else a balance transfer of several thousands could cost you several hundred dollars. You also want to make sure that the bank does not a high annual fee, maintenance fee, activation fee, or joining fee. You are giving the credit card company your business
don't let them take the upper hand. With so many credit card companies, there are a lot to choose from.
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