Credit

You see ads for a balance transfer all the time. They come in the mail, especially addressed with your name. They pop up in ads on your computer screen as you work or check your email. These constant reminders may have you asking yourself, “should I use a balance transfer option?” The answer might be yes. However, you should look carefully into the details of the balance transfer option before moving your money around from one place to another.

What is a balance transfer

Put simple, a balance transfer is when you take some or all of the amount of money which you owe to one lender and you transfer that debt to another lender. The second lender pays the bill to the first lender and takes on the debt, thereby becoming the sole lender on the amount transferred. Credit card companies offer strong incentives for the balance transfer because they benefit financially from taking on the debt, since any interest paid will now be profit for them.

Understanding interest rates

The main reason to consider a balance transfer is to reduce your interest rates. Interest is a percentage of the balance which is added on to the balance owed each month in the form of a finance charge. The interest is usually expressed in terms of an APR or annual percentage rate, which is divided by twelve (the number of months in the year) and then multiplied by the balance each month. Many times, a balance transfer option will advertise “zero percent APR”, meaning that no interest rate is charged during the promotional period of the balance transfer.

Switching back and forth

The balance transfer option almost always comes with a limited promotional period. What this means is that you may have a low or zero APR on your balance transfer for four to six months but then the APR jumps up to twenty percent. Before making any balance transfer decisions, you should found out the length of time for which the low balance transfer rate will be in effect and the APR charged after the promotional period of the balance transfer has ended.

Some people keep strict records of when the promotional periods of balance transfer options are due to expire and will balance transfer again to a card with a lower rate just before the promotional period has ended. While this is a good method of keeping your interest rates low, it can reflect poorly on your credit score if you are frequently using the balance transfer option. Instead of making excessive use of the balance transfer option, you should contact the customer service representative at each of your credit card companies and try to negotiate the best interest rate over the longest period of time. In the event that this does not result in a satisfactory rate, you can always use the balance transfer option as a back-up plan.

Responsible repayment

The balance transfer option should not be used to avoid repayment of your credit cards. Instead, it should be used as a method of reducing your monthly bills in order to more efficiently repay any outstanding debt.

Martin Lukac, represents http://www.RateEmpire.com, a finance web-company specializing in real estate/mortgage market. We specialize in daily updates, rate predictions, mortgage rates and more. Find low home loan mortgage interest rates from hundreds of mortgage companies! Visit http://www.RateEmpire.com today.

Share This

When it comes to using balance transfer credit cards, many consumers are filled with questions and concerns. While there are many benefits to using a balance transfer credit card, it is always best to have these questions answered and the concerns satisfied before moving forward with applying for one of these cards.

How Can Balance Transfer Credit Cards Save Me Money?

Balance transfer credit cards can save you money by reducing the amount of finance charges you pay every year. If you transfer even a small amount of money, such a $1,000, from a card with a higher APR to one with a lower APR, you will see a difference. For example, if you have a credit card with a 20% APR, you will pay $200 per year to maintain that $1,000 balance. On the other hand, you will pay only $80 on that same balance if you have a credit card with an 8% APR. That is a savings of $120! Imagine how much you will save on larger balances.

Even better, the best balance transfer credit cards offer 0.00% introductory APRs, which means you will pay no finance charges while that introductory period is active. With some balance transfer credit cards, this special rate remains in place until the entire amount you transferred is paid off.

What is an “Introductory Rate?”

An introductory rate is a special APR that lasts for a limited time. Often, the length of time this rate is in place is determined by your credit history. The introductory rate can be in place for as long as one year, though more common durations are six months, three months, and one month.

What is a “Fixed Rate?”

A fixed rate is a rate that does not change. Balance transfer credit cards with a low fixed rate may not offer a 0.00% introductory APR, but they might offer a 7.99% APR that remains this low no matter how long it takes you to pay off your balance, rather than skyrocketing up to 19.99% after the introductory period is over.

Why Does Everyone Say Balance Transfer Credit Cards are More Convenient?

Many people feel balance transfer credit cards are more convenient because it places all of your debt in one place. This makes it easier to track your expenses, to create a budget, and to get your bills paid on time.

Is it OK to Pay Only the Minimum Payment on My Balance Transfer Credit Card?

From a legal standpoint, all you are required to pay on your balance transfer credit card is the minimum payment. From a financial standpoint, however, this is a bad habit to get into. If you pay only the minimum payment, it can take you decades to pay off your debt - and that assumes you are not adding any more debt to your balance. So, if you want to get out of debt (and who doesn’t?), it is best to pay off more than your minimum payment. Set up a budget that allows for regular payments above your minimum payment to be sent to the credit card company - and stick to it.

Will a Balance Transfer Credit Card Get Me Out of Debt?

Yes and no. If used alone, a balance transfer credit card will not get you out of debt. If you transfer all of your credit card balances to your balance transfer credit card and pay only the minimum payment, it can still take you years to pay off the debt. Therefore, a balance transfer credit card should be viewed as one tool in you tool belt for helping you work your way out of debt. If used correctly and to its fullest advantage, it can help you get out - and stay out - of debt.

For more on the benefits of balance transfer credit cards, Robert Alan recommends that you visit CreditCardAssist.com

Share This

Balance transfer credit cards are those that make an excellent choice for transferring balances from one card to the other. The main purpose behind transferring balances is to remove debt from a card with a higher interest rate to one with a lower interest rate. In this way, the consumer can save money by reducing or even eliminating finance charges. When looking for the best balance transfer credit cards, it is important to look at a variety of factors.

The Annual Percentage Rate (APR) is one of the first factors a consumer should consider when looking for the best balance transfer credit cards. Credit card companies are hoping to steal your business away from other credit card companies. As a result, they often make special introductory offers with lowered interest rates for balance transfers. In many cases, this APR will even be 0.00%. Be sure to find the balance transfer credit card offering the lowest APR, and then only use that card for your balance transfer. Don’t use it to make any purchases. This is what the credit card companies are hoping consumers will do so they can assess finance charges on the purchases they make with their card.

The length of the special introductory APR varies from card to card. Sometimes, the length is also dependent upon the applicant’s credit history. It is important to be sure how long this period lasts and to set goals to have the balance paid in full once the introductory period is complete. The best balance transfer credit cards will keep the special introductory rate in effect on the card for the life of the loan. In other words, the APR stays the same until it has been paid off entirely. For consumers that will not be able to pay off the balance within the introductory period, this is certainly the best way to go.

Most credit cards assess fees when making balance transfers. These fees are generally determined as a percentage of the total amount of funds transferred. Most commonly, balance transfer fees are 3% of the amount transferred. Many balance transfer credit cards will, however, waive these fees during the introductory period. It is best for consumers to choose these balance transfer credit cards. Otherwise, they may be paying large amounts in fees, negating the savings in finance charges.

Some balance transfer credit cards require initiating balance transfers at the time of application for the card. Yet others allow balance transfers to be completed throughout the duration of the introductory period. The best balance transfer credit cards are the former, simply because they allow for more flexibility. Consumers who are sure they will not need to transfer balances later may, however, be happy with a credit card that only allows transfers to be made at the time of application.

Some balance transfer credit cards place restrictions on the types of balances that can be transferred. For example, some business credit cards only allow business expenses to be eligible for introductory rates. It is important for consumers to be sure to understand what type of balances can be transferred before applying for a card to ensure it meets their needs.

Many balance transfer credit cards also have special rewards programs. Consumers need to compare the programs before deciding on a credit card so they can choose the card with the rewards program best suited to their lifestyle. In addition, some balance transfer credit cards do not count the funds that are transferred toward the points system used in the rewards programs. To get the most of the card, consumers should find balance transfer credit cards that do count the transfers toward their rewards programs.

Robert Willard recommends you visit CreditCardAssist.com for more free information and advice about the best balance transfer credit cards currently available in the marketplace.

Share This