How Low Interest Rate Balance Transfer Cards Work

Find out how a balance transfer card works so you can take full advantage of it. Learn about the greatest mistake you can make that can ruin the whole point.

Anyone who takes a credit card runs the risk of building up a debt they cannot pay off within the month, and this is where a balance transfer card may come in. That’s not to say you should make a balance transfer the moment you cannot pay your bill; it will all depend on the size of your debt and how soon you think you can pay it off.

Any debt you think can be paid off within 2 or 3 months probably will not require a balance transfer to sort out. This is because the majority of balance transfer cards charge an annual fee. You need to know that if you do take out a new card for a balance transfer, you will save more with the lower interest charges than you pay on its annual fee.

Transferring a balance requires that you have a good credit rating to begin with. If you have fallen into serious debt problems that have affected your credit rating, you may be refused a new balance transfer card. Assuming this is not the case, the easiest way to make your transfer is when you apply for the new card on the specific page reserved for this purpose. This ensures that you take advantage of the whole period of the balance transfer offer. The clock will start ticking on any balance transfer you make when you are approved for your card. If you only have six months on the deal, you do not want to miss out on even a few days at the lower rate of interest. Besides which, your ability to make a transfer may be limited to as little as 30 days from the date the card is yours.

Making a success out of your balance transfer card relies on your having done a few sums. You must know that you can pay off the debt within the given period. If not, the rate will revert to the regular purchase rate, and in some cases may even by the higher cash advance rate. This is not a rate you want to get trapped with.

You should also restrict the use of your balance transfer card to the transfer only. If you make any purchases or cash advances whilst you debt is still owing, these amounts will accrue the relevant rates untouched until the transfer has been cleared in full. Credit card companies always use your payments to reduce your cheapest dates first. This keep your more expensive debts accruing interest for the provider for the longest time.

As long as you follow these simple rules, you can use a low balance transfer card to your full advantage and clear your debt sooner.

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Posted on Tuesday, April 6th, 2010 at 1:11 pm