Balance Transfers
April 12, 2008
Balance transfers can be a solution to existing credit cards with a high interest rate and an outstanding balance. Many companies offer balance transfers with a low interest rate and some offer a 0% interest rate to gain your service. This can be a good way to get your card paid off faster and with lower monthly payments.
Balance transfers can help consolidate all your credit card debts in one place. If you plan to purchase a necessary item, such as a refrigerator, washing machine, etc. and have no choice but to use a credit card, a balance transfer can help lessen the overall debt you’ll pay. Purchase the item and use your existing credit card. Then use the balance transfer with a low or 0% interest rate.
Although balance transfers can seem ideal, it’s important to read the terms very carefully. You need to understand if there are any hidden fees, what the expiration date is, what type of transfers are eligible for the low interest rate and if the interest rate is fixed or if it will increase over a period of time. If you don’t understand the terms, call the company and ask questions until you clearly understand. Otherwise, you could end up spending more than what you would have with your existing card.
For those who don’t have control over spending, balance transfers may seem an easy way to shuffle debt around in order to spend more and acquire more debt in the process. In that respect, you could get into more financial trouble. Credit cards and balance transfers can work very well, but they won’t clean up bad spending habits.
Read the terms carefully. Identify bad spending habits and make a commitment to resolving them and balance transfers may help you get out of debt faster.
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