Transfer Balances And Save Money On Interest

2007-03-08 10:33:40

( Financial )



If you have been a good credit card user and maintained the standing of your credit, you probably get a lot of mail inviting you to sign up for balance transfer credit cards.

As the name suggests, balance transfer credit cards allow you to transfer balances existing in one credit card to another and swap your interest rate from a high to a low (sometimes zero) level. Depending on your card usage, this could save you a tidy amount in interest charges.

Most people know it is easy to accumulate debts on credit cards, but not so many realize that you can save money when you transfer balances to another credit card. When you read the brochures, check what type of balance transfer credit cards are making the offer.

One type of balance transfer credit cards gives you a zero percent rate when you transfer balances but for a specified period. The other type gives you a lower rate (but not zero) but for an unlimited period.

In the first type, you pay no interest during the introductory period and whatever amount you pay to the card will all be applied to your balance. You would save money if you pay enough just to keep your account active and, as the promotional period ends, apply for other balance transfer credit cards with a similar offer. This demands that you closely monitor the promotional periods and that you be agile in quickly switching to another card.

The other type saves you the trouble of transferring to another card every few months since your transfer balances rate has no expiry. Remember, though, that any new charges you make to these balance transfer credit cards is charged the standard (higher) rate and any payments are applied first to the lower-rate balance. That simply means the remaining balance will consist of higher-interest debt.


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