Three Types of Balance Transfers by Rate and Duration

We all know basically what a balance transfer is. It is the process of paying off taking the balance off of one credit card and transferring that amount to another credit card either to consolidate debt or to reap the benefits of better terms on the card that the balanced is being transferred over to. But did you know that not all balance transfer offers are the same? There are three different types of balance transfer offers which all serve the same purpose but which differ significantly in terms of the way that the rate is offered and the duration of the offer. Knowing the differences between these three balance transfer types can significantly assist you in choosing the best balance transfer.

Here is a look at the three most common types of balance transfer offers:

1. Teaser Rate Balance Transfer Offer. This is the balance transfer that you are most likely to see advertised in which you are offered a very low interest rate (sometimes even 0%) if you are willing to transfer your balances over to this new card. There are two catches to this. One is that there is usually a fee to make the transfer. The other is that the low rate only lasts a short period of time and then may go up to an interest rate that is higher than the original balance on the card. This is a good choice for people trying to pay off debts in a short period of time but not for people who want to carry debt long-term.

2. Purchase Rate Balance Transfer Offer. With this type of balance transfer, you are able to transfer balances at the interest rate that is applied to new purchases made on the card. For example, if you have a card that charges 9.99% interest on purchases then this will be the new rate on the balance transfer. This is nice because it means that the application of payments to the different types of transactions on the card will be the same and therefore may be less confusing. However, if the purchase rate is not a great rate then this may not be a wise idea.

3. Fixed Life of Loan Rate Balance Transfer Offer. This type of balance transfer offers you a static rte on the balance transfer for as long as it takes you to pay it off. This rate is higher than a teaser rate balance transfer offer but will usually be lower than what the teaser rate changes to when the teaser period is up. This rate may sometimes be higher and sometimes lower than the purchase rate offer since the purchase rate offer is variable and this offer is fixed. People who want a static payment amount will like this type of balance transfer offer but it’s not always the one that makes the most sense financially.

There are pros and cons to each of the three types of balance transfer offers that are available. Choosing the right balance transfer offer can help you to save money and make your finances more conveniently organized.