Why use a balance tranfer card?

Posted by Caitlin on August 20th, 2008

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A balance transfer card is any credit card that allows cardholders to transfer a balance from a different credit card. Balance transfers can be a very helpful and effective means of managing credit card debt. If you have a credit card with a high APR and you are unable to pay your balance in full, you may be able to transfer that balance to a different credit card with a lower APR. This will allow you to avoid high interest rates while you work to pay off your credit card debt. However, there are also risks associated with balance transfers. It is essential that you read and understand the terms of your balance transfer card, and to use your credit responsibly.

Many credit cards offer a 0% introductory APR for balance transfers. This type of offer is ideal if you are planning to transfer a balance from a credit card with a high interest rate. But keep in mind that the 0% interest rate does not last forever. Typically, a 0% introductory balance transfer APR lasts for the first 3 to 12 months. The length of the introductory period depends on the card, but also on your credit history. Applicants with better credit will sometimes be offered a longer introductory period. Obviously, you should look for the longest introductory period possible. Once the introductory rate expires, the transferred balance will usually be subject to the purchase APR. Also, be aware that a single late payment can cause your introductory rate to expire prematurely.

When considering a balance transfer, take into account the fact that nearly every balance transfer card charges a transfer fee, usually around 3%. Some cards place a cap on this fee, but others do not.

If you decide that a balance transfer is a good strategy for managing your credit card debt, read the fine print and always pay your credit card bill on time. Do your best to pay off the entire balance before the introductory rate expires. Moving a large balance from one balance transfer card to another is a dangerous game that is likely to backfire in the long run.

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