Balance transfer credit cards are cards that allow the user to combine their credit card account balances into one single account and are ideally suited for those who are looking to reduce their credit card interest rates and simplify their finances. Utiliyzing a credit card’s balance transfer option to consolidate other high interest cards allows you to gain control of your finances by simplifying the payment process and will also save you money if you take advantage of credit card offers that feature competitive interest rates or other perks.
If you are looking to combine all of your high interest credit card accounts into a single card, you should keep a few things in mind. One of the most important considerations when looking for transfer a balance is the card’s interest rate. Most balance transfer cards have two different types of interest rates that should be considered. The first type of interest rate is the introductory rate. This is a rate that is usually lower than the long term interest rate and is only applied to the credit card balance for a short period of time, usually between six and twelve months, sometimes longer.
Many balance transfer credit cards offer very low introductory interest rates, sometimes they have rates as low as zero percent for a fixed amount of time if there is interest it is much lower than traditional rates. Low introductory interest rates are great for people who want to reduce their credit card balances by lowering the amount of interest they pay. Consolidating to a credit card with a zero percent introductory interest rate will give you temporary relief from increasing interest payments and will give you a chance to pay down the principal. Introductory interest rates are only meant to be an incentive to switch to the card, however, as they are only good for a fixed amount of time.
After the introductory period has expired the long term interest rate will take affect and interest will again begin to accrue if you have not been able to pay off the balance within the introductory period. The long term interest rate is always higher than the introductory rate so the best way to utilize a balance transfer credit card is to pay down the balance as much as possible during the introductory period. You should also make sure you are aware of how much the long term interest rate is to avoid paying more than you currently are after the introductory rate expires.
You should also be aware of any fees that the balance transfer credit card charges to transfer the balance. Some cards charge balance transfer fees and other don’t, and this should be an important consideration. These charges are usually undesirable unless the introductory and long term interest rates are low enough to offset the transfer fees. If you will be able to save enough money both during the initial interest period and after the long term interest rate takes affect, you can consider a balance transfer credit card with transfer fees.