Credit Card Balance Transfers Can Reduce Credit Card Expenses

Credit Card Balance Transfers Can Reduce Credit Card Expenses

Thanks to lawmakers and federal banking regulators, your credit card monthly statements have to carry more details than before. Credit Card Act of 2009 has mandated certain disclosures.

Now the new statements are designed to be more reader-friendly and help credit cardholders easily find important information on their monthly statements. Displayed are payments due, the amount owed, the consequences of making late payments and how much you are paying in fees and interest on different types of accounts.

Among the new features, there is one that warns consumers about the result of making only minimum payments each month. Each credit card bill must now have a box that states how long (in months or years) it will take to pay off the entire balance if the card-holder makes the minimum payment compared to how long it might take to pay it off when making higher payments. This box also states the total dollar amount cardholders would pay when both interest and principal are made factors in the payment plan. The results can be eye-opening for some borrowers

By law, every credit card company is now required to display prominently how long it will take to pay off your credit card balance by only making the minimum payment. For a small balance of $600 on a credit card with a 14% interest rate, you will realize that you would need 6 years to get out of debt-at a cost of over $600. And 14% is a relatively low interest rate.

Fortunately, there is a relatively easy way to save money on credit card interest and significantly reduce credit card debt at the same time. This is the balance transfer.

Along with the federal Fair Debt Collection Practices Act (FDCPA) guidelines, the Truth In Lending Act (TILA) require credit card interest, finance charges and total loan to be displayed on the monthly statement. These TILA and FDCPA guidelines along with the Credit Card Act will now ensure complete protection of card holders.

Balance transfers are simple transactions. You have to move your higher interest credit card debt to a new credit card that offers a low promotional rate typically 0% for the first year. During this 0% interest period, your credit card balances do not accrue interest and this saves you a lot of money which you would have otherwise spent on reducing interest to decrease principal amount

Balance transfers are effective tools to reduce credit card interest expenses, indeed. However, balance transfers come with a cost. There is a one time fee of 3.5% and balance transfers can be completed in minimum time. The biggest advantage in balance transfers is that you would not end up in debt collector harassment due to defaulted payment on credit cards.

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