Balance Transfer Cards
A balance transfer credit card can end up saving you a lot of money. Nearly everyone has some credit card debt. Many people have balances on more than one credit card. Most people are looking for a way to lower their monthly credit card payments and transfer card can help. It is possible to refinance your existing credit card debt at a lower interest rate by using a balance transfer credit card.
How It Works
By transferring all of your existing credit card debt to a new credit card
with a lower, introductory transfer interest rate, you can save money and
lower your monthly payments. Once you have transferred your credit card
balances onto the new card, your balance is subject to the lower,
introductory interest rate. The new lower interest rate means lower monthly
payments. It may also mean that you can pay off your debt more quickly.
Introductory Period
The low interest rate on a balance transfer credit card typically only
applies during an introductory period specified by the card issuer. The
introductory period varies, but it is often less than a year. At the end of
the introductory period, the interest rate on the balance transfer credit
card increases. It may even be higher than the interest rate on your
previous credit cards. That�s why it is important to read the
fine print on your credit card application.
Use a Balance Transfer Credit Card to Pay Off Debt
Once you have transferred all of your credit card balances to the balance
transfer credit card, you may decide to use the card to pay off your debt.
You can do this by making payments that are larger than the minimum payment
due during the introductory period when the interest rate on the credit
card is low. If you make large enough payments, you will pay off your debt.
Be sure to avoid making new credit card charges during this period. You
should also close your old credit card accounts.
Balance Transfer Versus New Purchases
Make sure that the low rate on your balance transfer credit card applies
to the transferred balance. Some credit card issuers will allow you to
transfer existing credit balances at a higher rate, reserving the low
interest rate for new purchases. To be sure, check the details on your
credit card application.
Avoid Paying Late
If you have transferred your credit card balances to a balance transfer
credit card, it is important to pay your credit card bill on time. Even a
single late payment may be enough to cause the credit card issuer to remove
the introductory rate and immediately start charging a higher, premium
interest rate on your transferred balance as well as on new purchases. At
the very least, you may incur a late fee.
The Bottom Line
A balance transfer credit card allows you to move your existing credit
card balances to a card with a lower, introductory interest rate. By taking
advantage of the lower interest rate during the introductory period you can
significantly reduce, or even pay off, your credit card debt. Make sure
that the lower introductory interest rate applies to the transferred
balance. It's also important to pay your bill promptly to avoid any late
fees or an increase in the interest rate.
