Credit card balance transfers are becoming increasingly popular among consumers who are paying high interest rates on their credit card balances. Some consumers also choose to make credit card balance transfers for the purpose of lowering or eliminating their debt.
What are credit card balance transfers?
A credit card balance transfer is a popular debt management technique used to eliminate or reduce card debts. It is an effective tool that helps you manage your debt more effectively by transferring your outstanding balances to a lower interest rate account and also gives you more time to pay down your outstanding balance.
A balance transfer usually involves moving current outstanding debt from one credit card to a different credit card usually a lower interest rate account. Consumers usually use credit card balance transfers either to secure a better interest rate or to benefit from a variety of rewards programs available at some credit card companies.
The key advantage of credit card balance transfers is that they can save you money. A credit card with a zero percent introductory interest rate and no balance transfer fees will save you in interest payments over the term of the loan. In addition, it may give you a tax break. These benefits are important reasons why consumers use these kinds of debt-management tools.
Can a balance transfer really help with debt management?
However, there are disadvantages associated with credit card balance transfers. You may end up paying more than you would if you had not transferred your balance. Generally, balance transfers have a fairly short term effect on the total amount you are paying monthly. After your introductory interest rates are ended, your payment will then start to increase. If you continue to be an active user after the introductory period, the cost of credit card debt will continue to increase. You can avoid this by simply transferring your debt into a lower interest saving account before the introductory period ends.
3 interesting pros for you to consider
There are many pros and cons of credit card balance transfers that you should consider carefully before making a decision. One of the pros is that you will save money each month by paying less interest. In addition, you will likely receive a variety of reward programs, including air miles, cash back, or other prizes. This can save you quite a bit of money if you make a large purchase during the promotional period.
Another pro is that transferring your balances to a low or new credit card offers a way for you to consolidate your debt. If you were having many different credit cards and a lot of late or missed payments, this is probably a good option for you. This helps you avoid paying high interest fees and penalties and lowers your overall debt load.
Yet another pro for a credit card balance transfer is that you do not have to take all of the cash that you are earning. With a cash-back or reward program, some of your cash may be going to paying off higher interest debts, but the majority of it will go to reducing your debt. You don’t have to pay off your entire debt during the promotional period, but transferring your debt makes sense. After all, if you are saving money, why not spend it?
Are There Any Risks?
Here’s a con to credit card balance transfers: Most people find that they have to cancel their old cards or stop making new purchases during the introductory period.
If you don’t have to worry about this, then a transfer is probably not worth it for you. Remember, you can always transfer your balance at any time, even when the promotional rate is ending, so you don’t have to cancel. However, you might need to start paying more interest during the second half of the introductory period if you choose to transfer.
Credit card balance transfers are helpful for many people. However, there are risks involved. If you choose the wrong balance transfer offer and don’t pay attention to the details, you could end up losing money. Make sure that you do your research and understand how credit card companies work. Then, you’ll be able to determine if a balance transfer is right for you.…