How to Make Balance Transfer Credit Card Debt Simpler to Manage
A balance transfer is simply the transfer of your balance from an account to a different account, most often held at a different financial institution. It’s most commonly utilized when talking about a credit card balance transfer. This means you are simply changing the name of one account to another. For example, a balance transfer could be made from a personal credit card to a merchant credit card. Here is some more information on balance transfers and their usefulness.
One of the main reasons people use balance transfers is that they offer an opportunity to reduce debt. If you transfer all of your credit card balances to a low interest rate card you will immediately lower your monthly payments. Balance transfers allow you to pay less each month because the amount of interest you pay is reduced. Most introductory periods last for an introductory period of between six to twelve months, during which you’ll either pay no interest or very little interest.
After the introductory period you might find that your new interest rate is higher than what you were paying previously. If this is the case, you can do something similar as you did in the past. You might take a twenty percent reduction from your balance to lower your payment amounts by about ten percent. While you might take advantage of a longer interest rate you might also decide you’d like to transfer your balance again.
If you don’t have a lot of time, however, it might be more convenient to just transfer your balance to a low interest rate card. Balance transfers usually last for about six months and after this time period you’ll either need to apply for a new card or stop making any new payments. You can make an instant impact on your debt by transferring your balances to yourself. Once you apply for a new credit card, your debt will show on your new card statement. This means that you’ll immediately start paying lower interest rates.
There are two types of balance transfers: open balance transfers and revolving balance transfers. With an open transfer, you transfer your balances without paying any interest or fees until your introductory period ends. Your interest charges will be higher during the introductory period, but you won’t have to worry about balance transfers during this time. You can use the promotional period to pay down your debt while avoiding any additional fees.
A revolving balance transfer allows you to move your balance between different cards during the year. This is a good idea if you need to cover multiple expenses at the same time, or if you frequently change jobs. However, transferring means that your monthly balance will increase. You will pay interest on the balance transferred as long as you don’t cancel your accounts. Once the introductory period ends, your interest rate will be determined based on current rates. The advantage to this type of transfer is that you do not have to keep track of your balance because your interest rate won’t change unless you cancel the account.
In addition to balance transfers, many credit card balance transfers are made during the introductory interest rates. During these interest free periods, some companies will offer to transfer your balance to their better performing cards for an extended period of time. Many of these offers last for a six month term, though it’s possible for a few longer-term transfers to be offered. However, these longer term transfers are subject to regular interest rate hikes, and you may have to pay more in the end.
Ultimately, it all comes down to choosing the best balance transfer offer for your financial situation. You want to choose one with the longest introductory interest rate. You also want to choose one that offers minimal fees and charges. Finally, you need to make sure the interest rate is at or below the posted credit card rates for at least six months prior to transferring your balance.