Balance Transfer Credit Cards
The benefit of doing so being that your new balance will come at much lower interest rate and possibly even zero percent interest depending on the card company.
Utilizing a balance transfer is a tremendous way to save money and paid down your debt much faster than you would have been able to at your current rate of interest.
For example if you have a balance of $500 at 20 percent interest and then transfer it to a new credit card where your interest rate is now 5 percent, one can clearly see the benefit that comes with that.
So to put it simply when you do a balance transfer the new card company in essence pays off your current balance and it now shows up on your their card at a lower rate of interest. Now you have one credit card with a zero balance and a new card with your prior balance. Doing this doesn’t close your previous account so that will be something you’ll need to decide you want to do as tempting as having two lines of credit can be.
Balance Transfers are Great Deals but Beware
However keep in mind, credit card companies are in the business of making money and wouldn’t make these offers if it didn’t benefit them somehow. Usually when you’re approved for a balance transfer the issuing company will require a “transfer fee” which can anything from $100 to 3 percent of the amount of your transfer. Not all cards require this so that’s something to look into before applying.
The other way this benefits the credit card company is the fact that they are banking (no pun intended) on the fact that you won’t pay off your balance before the window of opportunity closes. You see when you do a balance transfer the low rate or zero rate of interest only lasts for a set amount of time before it resets to their standard rate and begins accruing on your debt.
So if your someone who wants to save money on all that high interest and has the discipline to stick to your guns and pay off the debt soon after the transfer is complete than a Balance Transfer Credit Card is a great way to accomplish ridding yourself of the burden of high rates of interest being charged to your card month after month.