Insights Into Lifetime Balance Transfers

January 20th, 2010

When you are trying to get out of debt you should look into lifetime balance transfers. Most people understand the concept of a balance transfer which is used to get a lower interest rate on their current credit card debt.

Sometimes you hear talk of constantly transferring balances from one card to another as the introductory zero percent or other low interest rate runs out. It sounds like a great way to save money on interest but it also sounds like a lot of work. It is a bit of work, which is why lifetime balance transfers are a somewhat better idea.

A card that has lifetime balance transfers will offer you a constant low interest rate for the entire time you have the credit card. This option is especially valuable if you know that you will not be able to pay off the debt in a year, the typical introductory period on those zero percent cards. You may spend a bit more then you would on a no interest card but you will save yourself the hassle of switching from card to card. Even more importantly you will negate the risk of missing the end date for the introductory deal and winding up walloped with interest charges anyway.

If you are one of the many consumers who is considering a second mortgage or a personal loan to pay off credit card debt you too should consider a card with lifetime balance transfers. If you examine the numbers closely you will likely see that the interest you would pay on the balance transfer is less then what you would pay by increasing your mortgage or taking out that personal loan. Also, the interest on your card will be fixed so you will never have to worry about rises in interest rates affecting your debt.

The one negative that you should be aware of with lifetime balance transfers is negative payment hierarchy. This refers to the practice by credit card companies of paying down your cheapest debt first. What this means is that if you use your card for a purchase of $100, that $100 will get a regular purchase interest rate. Even if you send and extra $100 to your credit card bill that money will only go toward the outstanding low interest rate debt until it is completely paid off. You could wind up paying a higher interest rate on that original $100 purchase for a very long time. A card for lifetime balance transfers should only be used for the transfer until it is paid in full.