Credit card companies realised during the credit crisis that if they could give people an out from their high interest credit card debt, they could attract more customers. The result of the realisation was the balance transfer card, and they are cards which offer an introductory offer that includes a very low rate on balance transfers.

The goal is that by offering you a very low rate to transfer your debt, you’ll switch to them instead of using another credit card company. Generally, you can expect to get a rate between 0% and 6%. When used correctly, this rate can greatly enhance your chances of paying off your balances much more quickly.

Fee Limiting

There are banks that will put limits on how high the fees that they charge you for transferring your balance can be. This can be a huge help when you’re trying to decide which card you should use for your balance transfer card.  If you’re transferring $5,000, then you’re going to save money by choosing a card that will only charge you a max of $50 as opposed to a card that charges you a 4 or 5% transfer fee.

There’s a lot more that you should take into consideration when you’re considering your balance transfer card options as well. A few things you might consider are:

• How long is the introductory period? You need to know how long you can use your low rate.
• What are the balance transfer fees and…
• Is the fee capped or does it grow?
• What is the annual fee of the card(s) you’re considering?
• What happens should you make a late payment or miss a payment?
• Do you know your standard rate once your introductory period expires?
• What about the rate for your cash transactions?

The Balance Transfer Trap

While a balance transfer card can be an excellent tool for helping you get out of debt, there are also potential problems associated with these cards. One of the biggest is when you’ve applied for and been approved for your balance transfer card, but you don’t immediately transfer the balance. Occasionally, a bank might charge the standard rate to a delayed transfer.

Another way that you can accidentally undermine the usefulness of your balance transfer card is to spend like you always have. If you move your high balance over and then start spending with the card like you always have, then you’re going to put yourself in the same position that you started in, or worse. This is because you’re going to be charged the standard rate on your new purchases in most cases.

When you have multiple interest rates on one card, the payments that you make are applied only to the balance with a certain interest rate. Say you have a balance transfer rate of 2.9%, a purchase rate of 16.9% and a cash transfer rate of 20.9%. The lender knows they’re going to make the most money if they use your payments to pay off the lowest rate first, and that’s what they do. The high interest purchase and cash advance balances will continue to accrue interest on the full balance.

One of the best, easiest, and most popular tools that can be used to reduce credit card debt is another credit card. That sounds like a bad idea, but a balance transfer card, when used properly, can be one of the easiest and best ways to get out from under a mountain of credit card debt. These cards work with introductory offers of low interest rates for short period of time, generally between six months to a year, that will allow you to pay down your high interest credit card debt much faster. This is, of course, provided you do it right.

What Am I Looking For?

The biggest thing you need to look at for your balance transfer card is going to be the interest rate during the introductory period. You can find rates ranging anywhere between 0% and 5.99%, some are slightly higher but will last much longer, up the the entire life of the balance transfer. Most of the lowest rates will last anywhere between 3 to 6 months (for most 0% offers) to a year (for anything higher than 2.99%). These periods and rates will vary depending on the card, but they seem to be the averages.

It goes without saying that the lower your rate, the less you will pay in interest. If you come across the 0% cards then you need to be sure that all of the other rates, terms and conditions are still going to come out in your favor. You could have a great low rate, but if your high annual fee or other charges negate the benefit, it’s not really a gain, is it?

Length Of The Introductory Rate

The next thing that you should check on is the term for your rate. The longer you have your rate then the longer you will be saving money, which is what you’re going to need for very large balance transfers. Your goal here is to pay the outstanding balance before your rate expires, so you need to get a rate that won’t expire before you’ve paid off the debt. You might be okay if you’re stuck with an interest charge for a month or two, but if you transfer a $15,000 debt onto a card with 0% for six months and you only manage to pay down $6,000 of it, you’re stuck with $9,000 at around 20% for however long it takes you to pay it off, which is no good.

Standard Rate

The introductory balance transfer rate is important in the short term, but once that’s paid off you’re stuck with the standard rate. For that reason, you need to know what it is and that you can afford it. Or, maybe, that you have no intention of keeping the card once the transfer is paid off.

Fees And Charges

You also need to know what your annual fees and other charges are going to be, and that you’re completely OK with them. Remember, you’re probably going to keep this card for a while, even after the balance transfer is paid off, so you need to know that everything is OK.

Balance transfers can be your best friend for getting out from under high interest credit card debt, or they could lead you into just another debt trap. This depends entirely upon how seriously you try to take advantage of the offer, as well as your credit spending habits. If you get a balance transfer card and just start spending on it like you always have, you’re likely wasting your time and money.

A Warning

As stated above, balance transfer can be great for your debt, or they prove to be your worst enemy. The biggest problem that most people face with a balance transfer is going right back to their old spending habits. If you get a balance transfer card and then start spending on it like you always have, you’re probably going to put yourself in a worse position than you started in.

This is due to the way in which credit card companies apply your payments. During the introductory balance transfer period, you likely have three different interest rates. The balance transfer rate will be the lowest, followed by the purchase rate and finally, the cash advance rate being the highest.

Credit card companies exist to make money. While balance transfer offers are designed to help you out, interest rates are designed to take your money and credit cards are a profit vehicle. The bank, then, will apply your payments to the part of the balance making them the least amount of money: your balance transfer. Chances are that you transferred a pretty large sum of money, so while you’re busy paying that off, any purchases or cash advances you’ve made are sitting in your account, quietly gathering interest and costing you money.

How To Perform A Balance Transfer

Getting your balance transfer is probably the most simple financial transaction you’ll ever make. If a card has a balance transfer offer available, it will be included in your application. All you need to do is to fill out the part of the application that asks your for your balance transfer details. You’ll be asked for the card issuer, the card number, and the amount of money you wish to pay off. Most offers will have a minimum amount that you can transfer which varies by bank. You can probably find the minimum on your application or the lender’s website.

Lower Interest Doesn’t Mean You Can Slack On The Payments

Just because you’ve landed a sweet low interest rate doesn’t mean that you can slack on the payments. A credit card offers you the opportunity to pay as little (at least the minimum) or as much as you’d like. You should aim to pay off the debt as quickly as you can. You’ll save money on interest and you’ll have the money free when you need it again – and it’s always nice to have extra cash in case of emergency.

Also, your new lender could require a higher minimum monthly payment than your previous lender did. Chances are, this won’t be the case or it won’t matter because you made this transfer with the intention of paying the debt off, but if it is higher than you can afford, you could be in trouble.

Balance transfer cards have become a major hit in the recent economic woes people around the globe have experienced recently. It’s true that you truly can save a great deal of money and pay off your debt faster if you use these cards correctly, but if you can get an interest free balance transfer card, you can save a whole lot more and pay off your debt much faster. Whether you’re looking at a small debt or a huge debt, accumulating interest on a high rate card is going to be costing you a lot of money. By transferring your balance to a low or no interest balance transfer card, you’ll pay it off much faster.

How Does An Interest Free Transfer Work?

In a balance transfer, your new card will pay off your old credit card and move the balance over to the new card. They may pay off the full balance or only a portion, depending on what you can and what you want to move. The reason people use these facilities is to save money on interest. Chances are the card you have now has a rate somewhere between 13% and somewhere in the 20% range. A balance transfer card will offer you an introductory balance transfer rate that is generally between 0% and 6%. You could be paying HALF the interest or even less!

One of the more attractive offers in the balance transfer world is, of course, the interest free balance transfer card. These allow you to put all of your payment directly towards the balance with no interest involved whatsoever.

What To Remember

Your zero percent interest rate is a great deal that could save you a very large amount of money. Unfortunately, it won’t last forever. You can expect a rate of zero to last for 3 to 6 months on average, with rare cards offering a year. As the economy continues to improve, zero percent offers of all kinds and lengths will get more and more rare.

After that introductory period is over, your rate will then jump back to the standard rate and in other it could go up even higher to the cash advance rate.

You have to decide how you plan to use the card and the best way to use it is to avoid purchases with it until the balance transfer is paid in full. If you make purchases with it, they’ll be waiting on you to finish paying off your transfer, with interest being added every month as the standard rate.

This will probably lead to your negating any savings that you may have had and could end up putting you right back in the same boat your started out in, or worse, leaving you in a worse position than before because you’ve now added more debt to your original balance. If you must purchase using a credit card, use your old card and pay it off. This probably means that you’ll have to make fewer and smaller purchases, but it’s worth it to get out of debt.

There’s a very simple rule in marketing – if you can offer to do something for someone for less money, just as good, they’re going to take you up on the offer. So when a credit card offers to loan you the same amount of money that another credit card already has, but at a lower interest rate, you’re more than likely going to take them up on the deal. That’s the goal of a balance transfer card: simply to get you away from one lender and in with another. Other than getting you there, the lower rate really has no benefit for the new lender.

The lender is betting that if they can just get you to come to them, you’re likely to stay for longer than the introductory period. They’re making some money on the balance transfer, even if they charged you zero percent – because they do charge a transfer fee. However, chances are that you’ll stick around for a while after you’ve paid off the debt, so they’re making money either way.

Long Term Disadvantages Of Balance Transfers

Balance transfers entice the customers by offering them a significantly lower interest rate on their existing debt, and all they have to do is switch to Credit Card X from Bank Z. This sounds great when you hear it, but most people don’t realise (or just don’t think about) the fact that when the introductory period is over, that interest rate is going to jump right back up to whatever the lender’s standard rate is. Most don’t look past that initial period and they aren’t really sure what they’ll be paying if they don’t manage to pay down their debt within the time frame.

Why Do Cash Advances Cost More?

Cash advances are a silent killer in the credit card world. People don’t realise that they’re going to pay more for a cash advance on their credit card than they do for all the other transactions. A cash transaction on your credit card will almost always come with a much higher rate than any other transaction, and for most people, it’s a shock. You need to know how your payments work and how your balance is paid.

So, How Is It Paid?

In most cases, you’re going to have three different interest rates on your card during the introductory period, and you’ll rarely have less than 2. Your balance transfer rate is, during the introductory period, going to be the lowest. Your purchase rate will be next and the cash advance rate will be a little higher than the purchase rate.

When you make your payment, the bank doesn’t take the time to split it among the three rates. They make more money if they pay the portion of your balance with the lowest rate first, so before you get around to paying off your purchases or cash advances, you’re going to pay off what is probably a very large balance transfer. Meanwhile, your purchases and cash advances are sitting and waiting, racking up 20% or more in interest charges each year.

Balance transfer cards have become very popular to help avoid interest charges and to help pay off balances faster. This is because the typical balance transfer will get a rate of anywhere from 0% to 6% on average, making it appear much easier to pay down the balance. Truth told, these are usually a great tool for many people, but there are times you should avoid them. Here are a few of the times when you might want to avoid a balance transfer.

If You Can’t Stop Spending On A Credit Card

Credit cards are a great way to buy things that you might not have the money for right at the moment. Some people use their credit cards to float them from cheque to cheque and even intend to pay them off at the end of the month. This is a bad choice because more often than not, you can afford to pay it off at the end of the month. Even if you manage most of it, that little bit left over is going to snowball.

Credit cards use a backwards hierarchy in order to pay down debt, so they pay the lowest debt off first, allowing higher interest rates to sit and build. If you transfer your balance to a new card, close your old card and continue to spend like you always have, you’re going to notice your balance will stop falling after a while and will instead grow. You’ll end up stuck in the exact same trap that you were in before. The only real exception to this is if you can find a rare card that will give you the same interest rate on both your purchases and balance transfers for the same period.

When Your Debt Is Too High To Pay Off Before Your Rate Expires

Most balance transfer offers are introductory offers, meaning that one day, generally between six and twelve months away, your rate is going to expire. If you haven’t paid the balance before the rate expires, you’re going to see a drastic increase in the interest rate that you’re paying, and you could very easily end up exactly where you started at before you got your balance transfer. If you only have a small amount of the debt left, you might be okay, but if you’re stuck with a large chunk and a high interest rate, you could very easily end up right back in your old, sinking boat.

Budget Cuts Could Help You Easily Clear Your Debt

Even if you manage to get a zero percent rate on your new balance transfer card, you’re still going to incur some cost just for the transfer. Usually, your new card will charge you a fee that is a percentage of the amount which you are transferring. Your credit report will also be affected by this new card and if you’re already in. If you could just as easily pay off your debt by simply cutting some of your spending, then that’s going to be the best rate for you to take.

While most people know what a balance transfer card is, there are those who don’t. For those who don’t, a balance transfer card is a card that offers you a very low interest rate, typically for a limited time, on money transferred from a card issued by another bank onto their own card. This marketing ploy is used to get new customers with hopes that you’ll stick around after the balance is paid. The idea is that you paying their bank a lower rate is better than you giving any money to the competition.

If you know how to use a balance transfer card, you can definitely benefit from it by paying off your debt much faster and saving a great deal of money doing it. They work because they give you the chance to pay off your balance without the high interest rates typically associate with credit cards. The biggest reason that people fall into unmanageable debt in the first place is rarely the money they borrow, but the money they pay in interest and other fees. Balance transfer cards help you fight back against the high rates and get yourself out from under your mountain of debt much faster. In order to get the most out of them, though, you need to know how to use them.

Understand Your Introductory Period

The low interest rate that you’re offered is almost always an introductory offer and the lower the rate, the shorter the amount of time you have. 0% interest rates last 3 to six months, higher rates may last a year and the highest balance transfer rates are generally good until the balance is paid in full. While the zero interest rate may seem like the most attractive, the short introductory term could actually hurt you in the end. If your rate expires before you’ve paid your balance in full, you can quickly end up back in the same pit your just dug yourself out of.

Watch Your Fees

For most balance transfers, there will be a fee that you have to pay in order to use the feature. Usually, this fee is in the form of a percentage of the amount that you’re transferring. Make sure that even with the costs of the transfer, you’re still going to be saving money in the long run.

Make Your Payments On Time

This is probably the most important advice about balance transfers. By missing or making a late payment, you could lose the interest rate that you’ve been offered, which will probably put your right back where you started. In order to ensure this happens, you may want to set up automatic payments and make the extra payments when you can afford it.

Your credit card debt doesn’t have to crush you. There are alternative and though you may have made some mistakes in the past, you can learn from them and use your knowledge to your advantage now. Take the time to learn how to handle your cards and give yourself a second chance with balance transfer cards.

Balance transfers are tools built into most credit cards these days that allow you to transfer balances from other credit cards to your new card. Generally, this is done to escape high interest fees on other cards. A popular introductory offer is to offer a very low interest rate on balance transfers in order to gain new customers from other credit card issuers. You have to know how to use these cards or you could end up back in the same position. It’s important to remember that while they may look like they’re trying to help, their first goal is to make a profit. While they may sincerely hope they’re doing you a favor, they’re not going to complain when you haven’t paid off your balance and the interest rate jumps 15 points.

How To Make The Most Of Your Balance Transfers

First, you need to understand the introductory period. Most balance transfer cards are an introductory offer. What this means is that your low balance transfer rate is going to last only a short time, generally six to twelve months. It’s also usually related to what rate is being offered. The lower your rate, the shorter period of time it will last. The higher the rate, the longer it might last. 0% offers will always be six months in most cases. 8% rates may be life-of-balance deals. You need to know how large your debt is and how quickly you can pay it off in order to choose the right card.

When submitting your application, you need to know that your introductory period will begin with the day that your application is approved. With that mind, you need to submit your application for the balance transfer at the same time you apply for the card. This will allow you to maximise your balance transfer savings. Since both are approved at the same time, you’ll save the most money.

You’ll find that there are probably terms and costs that apply to the use of the option. In most cases, you have to transfer your balance from a card from a bank that isn’t the bank you’re getting your new card from. You can transfer from a MasterCard to a new MasterCard or from a MasterCard to a Visa, but you can’t transfer from a card issued by Citibank to another card from Citibank. That would pretty much make their goals moot points. There’s also generally a restriction that states you can only transfer up to X% of your available balance. This means that though you may have an available balance of $2,000, you can only transfer $1250 or $1500. You can also expect to be charged fees for the transfer and these are generally calculated as a percentage of the amount transferred. It’s important to make sure that you’re going to be saving money all the way through the application process, otherwise, it’s just a waste of your time.

While credit cards can definitely be used to dig yourself out of your hole, you need to know how to handle them in order to get the most out of them.

If you’ve found yourself stuck under a high rate credit card with a high balance, you might have looked into balance transfer cards, especially those with 0% interest rates on balance transfers. If you haven’t, you should. If you need a card that you’ll be able to make purchases on, though, you need to find a card that will offer you a 0% balance transfer and purchase rate.

These are perfect for those who need to transfer a balance, but will also need to make purchases with their credit cards. There are some things that you need to know about these cards and you can find them listed below.

How Balance Transfer Cards Work:

When you transfer a balance to a new card, you’re given a lower than average interest rate. This can range from 0% to 8% on average, depending on the term of the low interest rate. Shorter term, lower rate – longer term, higher rate. The problem many people run into with these cards is that they make purchases with them, ending up in the same position they were trying to avoid. This is because the lowest interest rate is always paid down first by credit card companies, so if you have $10,000 at 0% and $5,000 at 20%, that $5,000 is going to sit there and earn 20% interest until you’ve paid off the $10,000. That $5,000 will quickly outgrow the $10,000. You can find a card that will give you 0% for both transfers and purchases.

When looking for a card that offers you a balance transfer rate of 0% as well as a purchase rate of 0%, they’re going to be an introductory offer. Eventually, both rates will rise, it’s a matter of when. You want to know that, ideally, they’re both going to rise at the same time. Try to find one that offers the rate on both for 6 months, otherwise, you can end up having the same problem as above when one of the rates goes up and the other stays the same. Since purchase rates can easily be 20% and sometimes even more, you’re going to quickly find yourself buried under the same mountain of debt as before.

Read Your Terms

There is no chance of trying to get this “confusion” sorted out with the credit card company. They’re going to tell you quite simply, that it was your responsibility to read the terms and conditions through completely, and that there’s little, if anything, that they can do to help you. The payment hierarchy discussed earlier will be in there, as well as your interest rates (including the rate after the introductory offer) as well as the time periods that your introductory offer is good for. With 0% offers, don’t expect any longer than 6 months.

These cards can be a godsend for those with high debts on high interest cards, but they can also be a major trap if you don’t know how to properly use the cards. Be sure that you know all of the pertinent facts and that you budget and plan accordingly.

There are three big options that you have in balance transfer cards, and they can all save you a great deal of money over your current high interest credit card debt. Depending on how fast you can pay down your debt and how large your debt is, you might want to choose a different card. It’s best if you know what options are out there, and knowing it may just save you a good deal of money.

Once we’ve gotten into too much debt, it can be hard to fix it. This is bad enough, but when the time comes to find help and you have no idea where to find it, that just makes everything that much worse. One great option you can use to help out is the balance transfer card. Unfortunately, there’s a whole world of options you can choose from there, and trying to choose the right one for you can be confusing and frustrating all on its own. You need to know what’s available, and which one is best for your situation.

Just to clarify, so everyone knows what we’re talking about: Balance transfer cards are a sales gimmick. They were invented and marketed for one reason: to get you away from a competing bank and giving another bank your hard earned money. They offer such ridiculously low rates on balance transfers because in their eyes, it’s better you pay them a low rate than paying their competitor a higher rate. Despite that, they are still a good deal if you know how to use them.

6 Month Balance Transfer Credit Cards

The six month balance transfer card is a favorite of many people because it normally comes with a 0 percent interest rate. For six months, there’s almost no pressure because your debt won’t be growing. You can make your payments knowing that every single cent is being used to pay down your debt, and not being wasted on interest. This is great for any debt that you know you can pay down in six months. This may sound obvious, but if it’s not paid off in the six months, it will revert to the purchase rate on the card and you could find yourself right back where you started.

One Year Balance Transfer Card

The deal works the same as the six month card, but you can expect to pay a higher rate of interest since they’re giving you more time. The rates are usually between 3-5%. This doesn’t look as good as 0%, but that extra six months could make a huge different in whether or not you can fully pay off the debt in time. It’s better that you take a year at 6 months of low interest, than 6 at 0% then another 6 months at 20% or more.

Life Of Balance Transfer Credit Cards

This balance transfer card will allow you to take as long as you need to pay off your balance transfer, but the trade is that you can expect higher interest rates again. Still, 6-8% rates until it’s paid off are better than no or low rates for a short time, then paying 20% or more on the rest of the balance until its paid off. If you have extremely high debts on cards that you can’t handle, then this could be your best plan. You don’t find many of these offers, so you might have to hunt around.