subject: Tips for Using Balance Transfer Credit Cards [print this page] Tips for Using Balance Transfer Credit Cards
Wouldn't it be great if you could always have the same low interest rate that you got when you first received a credit card? Well that's the point of a balance transfer credit card really, you take what you owe on your current credit card on which you are paying a ridiculous amount of interest and transfer it to a new credit card with a lower rate of interest. You may transfer it to a card which again has a very low or 0% interest rate to begin with or you may decide to choose a card which has a lower rate long term. If you have been struggling for some time to make any kind of indent into your credit card balance then a balance transfer is a good way to go. You can pay the same you were paying before to just cover your interest but now also start to pay off the balance amount as well and the balance will start to come down: therefore the interest payments will also come down each month too. If you still keep paying the same amount though you may be surprised how quickly you can pay a card off where before you may have been paying the equivalent of what you owed in interest every two or three years.
Balance transfer cards are also a good option if you have a plan to pay off the credit card quite quickly. If you can pay it off in 6 months or a year it may be best to find one with an introductory rate of 0% even if it jumps massively afterwards. Most introductory rates are anywhere from 6 to 18 months, if you can get your card paid off in full in that time you will never have to pay any interest at all.
So if you are potentially going to borrow some money for a few months for free then why do credit card issuers offer you cards that you can use for balance transfer but which are also 0% interest? Well of course part of it is that they hope that you won't pay it off as quick as you might plan to and then they get you with a higher APR. By giving you that 0% for 6 to 18 months they are basically buying a customer from a rival and they may well already know how much you are likely to be paying in interest and whether you have always made these payments in the past. Of course credit card companies know that despite intentions most people who pay off a credit card don't cancel it, even if they hide or shred the card most of us will keep the account just in case and if you do decide to use it then credit card companies make their money here.
When choosing a balance transfer credit card you need to seriously consider if you will pay off a significant amount while it is 0% APR or whether long term you would be better off with a card that has a higher APR but which is lower than the 0% card's long term APR. Of course if your credit rating is good you may be able to get both and this is another reason to do a balance transfer if your current card was taken out while you had a poor credit score which has since improved making better cards available to you.
