Balance Transfer Credit Card

Balance Transfer Credit Card

Would you like to find a way to save more than $1000 to $1400 this year? If you are one of the American households that has $ 8000 or more in credit card debt, your answer could be a balance transfer credit card.

For most credit cards, the minimum payment due each month barely covers the interest. It could take you years to pay off that balance and with payments totaling at least twice the original amount billed. Substituting a higher interest credit card with a lower interest card with a 0% APR introductory offer for the first twelve months makes perfect sense. If you take the time to compare balance transfer credit card offers and figure out a payment strategy, you could significantly lower your credit card debt, interest free.

Many of the balance transfer credit card offers include a transfer fee, either a minimum of $50 up to 3%. You need to take this into consideration when computing your savings.

Of course the best strategy would be with the intention of having the full balance paid off by the end of the introductory period so you could be debt free. But if that is not possible, by paying what the minimum was previously, estimating $125 per month, add an additional $50 to $75 each month, you could still have a good portion of that balance paid down and save yourself over $1000 in a year. If at the end of the 0% introductory period, the new balance transfer credit card offers a lower rate than your present card, you’re still a winner.

Now there are a few things to remember when you’re playing this trading credit card game. If the purpose is to lower your debt, don’t continue to use the old credit card. After a few months you might want to cancel it.

Another thing to think about if you are planning on applying for another balance transfer credit card with a 0% APR introductory period when this card is twelve months old, that each credit inquiry effects your credit score. So try to keep switching credit cards to a minimum.

Applying for a balance transfer credit card can be effective if you have the right plan and stick to it. You can be on your road to be debt free and rather than pay interest to the bank, pay yourself. Think of how much you could accumulate if you were able to put that $125 to $200 each month into an interest bearing account that pays you!

Benefits of Competition

The balance transfer credit card is one of the starkest examples of how competition benefits the end consumer. Consumers with good credit and high credit card usage can use balance transfer credit card to save dollars from a few hundred to much more depending on their credit card usage and the amount of balance transfer.

In simple terms, if you have good credit, companies are looking to provide the offer, even if they do so at a lower rate of interest. You benefit from low interest and they acquire a valuable customer. So, a balance transfer credit card enables you to transfer your existing balance or even debt to a credit card with low or no interest.

Credit Card Balance Transfers Math

A look at the math of a credit card balance transfer will make the situation clearer. For instance, suppose you apply for balance transfer credit card from a reputed online vendor. Now, your interest on credit card debt runs up to, say $1450 dollars a year at an average with your credit card that has an APR of 10.99% assuming you have a good credit rating. Now the competing credit card company offers you a credit card with a 0% introductory APR for the first 12 months. By making a simple balance transfer to your new credit card, you save on one year’s credit card interest.  Now that is math that one can live with!

Shopping Guide To Balance Transfer Credit Cards

Initially consider the size of the balance transfers to be made, and correspondingly the amount of financial gain that follows.  The period of 0% APR is important, how much credit do you expect to use, and correspondingly how much interest will you save from credit card balance transfers during the offer.

Do the balance transfers incur a transaction fee and if so how much?  Consider how long the introductory APR lasts and the APR after that in your calculations.  And, as always, be sure to read the fine print. You don’t want to encounter unexpected costs. The best offer sometimes is not the one with the lowest rate of interest.  

Balance Transfer Trivia

The best type of balance transfer credit cards are the ones with a 0% rate of interest. Many companies have begun offering such cards, at an incredible introductory period of up to one year. It is possible to transfer your debt to a credit card with a 0% APR, and then retransfer it to another one at the end of the introductory APR period on the existing card. However this is not a recommended action as it can result in a lower credit rating for you. Credit card balance transfers can be done online; most companies offer this system of balance transfer. 

Credit Card Balance Transfers In A Nutshell

Substantial savings can result if you get you balance transfer credit card arithmetic right.  Before applying for one look, be sure to look at the fine print.  Good financial sense with credit card balance transfers can make for good finances. If you have spent substantially utilizing "plastic" money, a balance transfer credit card just might make good financial sense for you.

Debt Consolidation

Balance transfer credit cards can provide an excellent option for debt consolidation.  Many Americans are currently in debt and struggling for a way out.  Some choose to use a home equity loan to help get themselves out of debt, but not everyone has a home with built up equity to use for this purpose.  In addition, putting your home up as collateral for debt consolidation can be a bit nerve-wracking and many banks enforce annual maintenance fees and monetary penalties if you try to close the equity line before a specified period of time.  

Rising Interest Rates

Anyone that has been a credit card holder for some time or who pays attention to the financial marketplace knows that credit card rates on many cards have been on the rise.  Often, credit card companies are more than happy to increase interest rates when the prime rate is raised, but they are not so quick to bring the rates down when the prime rate decreases.  By consolidating your debt with a balance transfer credit card, you can remove your debt from your high interest cards and place it on your card with a lower interest rate.  The best balance transfer credit cards offer low introductory rates or low fixed rates on balance transfers, making them a great option for debt consolidation.

What to Look For

When looking for a balance transfer card for debt consolidation, you generally want to find the card with the lowest long-term rate.  More than likely, you will be consolidating a debt that you will be unable to pay in a short period of time.  If this is the case, your low interest introductory period may be over long before you are done paying off the debt.  

You also need to be cautious about fees when looking to consolidate debt with a balance transfer credit card.  Many credit cards charge a fee for transferring balances from another card onto theirs.  The best balance transfer credit cards will not charge an additional fee.  In addition, some balance transfer credit cards require transferred balances to be requested at the time of application for the card in order to be eligible for the special introductory offer.  While this may be fine for some people, you might want to have the flexibility to transfer balances.  In this case, you will want to select a card that allows you to transfer balances any time throughout the introductory period.

For the very best balance transfer credit cards, you will want to find one that maintains the low APR throughout the life of the balance you have transferred.  In other words, a balance you transfer on a card may have a 0.00% APR for the first six months, but then rocket to 19.99% when the period is over.  On the best balance transfer credit cards, however, the low introductory offer remains in place until you pay off the entire amount you have transferred.

Self-Discipline

Obviously, a balance transfer credit card cannot do all of the work for you.  While you can consolidate all of your bills onto just one card, you will need to be disciplined enough to pay the balance off.  If your introductory period expires after so many months, you should create a budgetary plan that will have the balance paid off by the time the period is over.  You might need to cut out some of the extras, such as the cup of fancy coffee you grab every morning, to help create a little extra cash flow.  It will be well worth it when you find yourself out of debt.  In addition, the money you are saving in finance charges should be paid toward your credit card debt

Facts and Myths

There are a number of balance transfer credit card facts and myths that are important to be cleared up.  Understanding these facts and myths will help you to better keep your finances under control.

Myth:  I can get arrested for continually transferring my credit card balances.

Legally, you can transfer your credit card balances as often as you want.  So long as you are making your payments and not attempting to defraud your lender, the law does not concern itself with how you choose to handle you finances.  It is, however, a bad practice to continually move your balance transfer credit card to another.  This is because, in order to do this, you need to open up several credit card accounts.  When it comes to your credit rating, having a large number of open accounts can lead to a bad credit rating.

Credit cards utilize what is known as "revolving credit."  This credit is different from something such as a car payment, which is paid back in installments.  Too much available revolving credit puts you in the high-risk category.  The basic thought process behind this is that it would be too easy for you to acquire a great deal of revolving credit, use it all up, and then default on your payments.   Therefore, using balance transfer credit cards to consolidate bills one time is a good idea, but it shouldn't be a routine practice.

Myth:  The best balance transfer credit cards have a 0.00% APR.

While it is true that the best balance transfer credit cards should offer a 0.00% APR, there are more factors to consider when choosing the best card.  For starters, you need to learn more about this special APR.  Do you need to complete the balance transfer at the time of application in order to qualify for the 0.00% APR, or do you have a window of time during which you make transfers?  Does the 0.00% APR last for the lifetime of the balance transfer, or will it rise to an above average APR within a few months? Does the balance transfer credit card offer other benefits, such as travel insurance and fraud protection?  Does the card offer a low APR for purchases, as well, or is it best to use the balance transfer credit card only for transfers?

Myth:  Balance transfer credit cards are the key to getting out of debt.

While balance transfer credit cards can assist you in taking control of your debt, they should not be considered your primary means of getting out of debt.  Instead, you should look at the balance transfer credit card as one tool in your tool belt of obtaining financial freedom.  You can consolidate all of your higher interest rate credit cards onto one balance transfer credit card, thereby paying less in finance charges.  It also makes it easier for you to keep track of your debts and your bills because all of your payments will be made to just one credit card.  Nonetheless, it takes responsibility, diligence, and proper planning to get out of debt - not just getting a balance transfer credit card.

Myth:  Balance transfer credit cards are hard to find.

Many people mistakenly believe it is difficult to find a great balance transfer credit card, but this is not true.  Many credit card companies offer special introductory rates in order to entice people to apply to their card.  After all, the more money you transfer to their card, the more money they can potentially make on the finance charges you have to pay.  In fact, you might even be able to make a card you currently have into a balance transfer credit card by calling the credit card company and asking them if they would be willing to give you a special deal.  Many companies will waive fees and lower interest rates to keep you with them