Low Interest Credit Cards And Balance Transfers - What You Need To Know

Credit cards are a convenient and safe way to make payments without actually carrying cash around. When used in a controlled manner, credit cards have their advantages. This can sometimes turn into a nightmare when the debt builds up on a high interest credit card. The solution may be to consider a balance transfer with a low interest credit card to save cash. While this seems easy, thanks to the stiff competition among credit card companies and the incentives they offer, there is more to it. Here is what you should know about credit card balance transfers before you make that final decision.

Signing Up With A New Card To Clear The Debt On The Old One

A balance transfer involves getting a new low interest credit card to pay off the debts on the old one, saving substantial money in interest charges. You will realize long-term savings from the switch only if you actually clear off the previous debt at the new low rate of interest.

Debt Consolidation Makes Your Debt Handling Easy

With a balance transfer to a single credit card that charges a low rate of interest, you can consolidate your debts, making it easier to handle the payments. This works if your debts have mounted up on multiple credit cards, resulting in payment defaults, late fees and interest charges. By shifting to one low interest credit card, you can focus on clearing the payment on a single card.

You Cannot Avoid The Fees

Moving from a high to low interest rate card does involve balance transfer fees, which is usually a percentage of the amount you transfer. You will have to decide if this fee justifies your long term benefits.

Introductory Transfer Rates

Balance transfer companies attract customers with an offer of low APRs. This is usually a limited period offer that ends after a specific number of months. It is important to learn the exact details and ensure that you do not exceed your credit limit and make your payments on time.

What The Transfer Rates Cover

The special offer for transfer rates may only cover the existing debt. New purchases may not be included. It is critical to check the fine print to see whether the special rates cover only the balance transfer or whether new purchases are also included.

Making Selective Payments

Once you do a credit card balance transfer, you cannot choose which payments you want to clear particularly if the rates of interest vary between transferred balances and new purchases. This is because it is not beneficial to the credit card company. This means the best course of action might be to avoid using the card for new purchases until the old debt is completely cleared.

Besides the above, remember that you cannot keep doing balance transfers to take advantage of introductory offers as it can damage your credit score. You usually need good credit to be eligible for balance transfer credit cards, so choose wisely and think before you move.