Save Money With Balance Transfer Credit Cards

February 17th, 2010

Discover the ins and outs of balance transfer credit cards. Find out how to pick the right one so that your debt can be managed down most effectively.

2.99% p.a. for 12 months9.99% p.a. for 12 months (reverts to 13.29% p.a.)

Balance transfer credit cards give the debt-ridden customer the opportunity to set their finances in better order. These cards allow you to transfer a balance from one credit card with a regular rate of interest to a new card that offers a zero or very low rate of interest for a certain limited period of time. Of course, credit card providers do not offer this service from the goodness of their hearts; they are out to steal your custom from your regular provider and hopefully gain a customer for life.

Select from all balance transfer credit cards wisely

Nevertheless, for this to work properly, the credit card company has to set a bait that is truly attractive, and this is what they do. Who wouldn’t want to exchange a 15% interest rate for a 0% interest rate, even if that’s just for six months? Balance transfer credit cards that offer twelve months deals for 2% to 5% or balance transfers for life at 6% to 8% can save the customer hundreds if not thousands of dollars in interest charges over the life of the debt.

All you need to do is decide which deal will suit your situation best. A smaller debt that can be paid off inside six months is clearly a candidate for the 0$ offers around at the moment; a debt that may take a little longer would suit the twelve months deals; and a really unwieldy debt may need a balance transfer for life deal.

It is very important to assess your finances carefully, and don’t be shy of asking someone else for their advice if figures aren’t your strong point. Getting this initial part wrong can completely undermine the whole reason for taking a balance transfer credit card in the first place.

Your intention should be to allow sufficient time to kill off your debt within the offer period. If a substantial part of it continues beyond this time, then it will become subject to the regular rate of interest applicable to purchases.

This can be higher with a balance transfer credit card than with other cards. Sometimes, you may even be hit by the cash advance interest rate of around 20%. The message here is to read the fine print.

One final point that must be mentioned is that you should never make purchases on a balance transfer credit card – not unless you want the total amount of your purchases (at the regular rate of interest) to remain untouched by your repayments until your transferred debt has been paid off in full. It’s an industry standard to apply your repayments in this way: to clear the cheapest debts first.

With those provisos in mind, you are ready to find your perfect plastic companion in your quest to reduce your debt.