Balance Transfers 101

Balance transfers are something that everyone with a credit card knows a little bit about. There are regularly promotional deals coming in the mail which advertise to the credit card holder that they can transfer their balances and get a better deal on payments and interest. However, many people don’t know whether these deals are a good way to go or just a scam. Balance transfers are indeed a great tool for keeping credit card payments under control but they only work successfully when the credit card holder knows what they’re all about.

The first thing that a consumer should know about balance transfers is that there is usually a catch. That’s not necessarily a bad thing; it’s just something to look out for. In most cases, the catch is that there is a fee associated with transferring the balance from one card to another. This means that after the transfer, the consumer will actually owe more money than before the transfer. Why would anyone want to do that? Well, sometimes the new interest rate is so low that the consumer will actually end up paying less in the long run than she would if she maintained the same balance at a higher interest rate.

Another thing to watch out for with balance transfers is the length of time that the low interest rate is going to last. Balance transfer deals almost always offer a low introductory interest rate but they vary in how long that rate lasts. More importantly, they vary in what the new rate will be once the promotional deal is over. When reviewing balance transfers, the consumer should always find out the length of time that there will be low interest and the rate of interest after that period has ended. This should be carefully compared with the rate currently paid in order to make sure that the deal is good for the long run.

Balance transfers offer many benefits to consumers. They can reduce the monthly payments on bills to make them affordable and reduce financial stress. They can consolidate debt onto one bill to make payments an easier process. And they can make it possible to ultimately pay less money to a lender on a debt depending on the cost of transaction fees, the interest rate and how quickly the loan can be paid off. But it takes doing the math and paying attention to the details to know how to successfully use balance transfers.