What You Should Know About a Credit Card Balance Transfer
If you are one of those individuals that have heavy credit card debt, then here is some good news. You can save some big money by taking advantage of a credit card balance transfer. With balance transfer credit cards you can take advantage of teaser rates that are offered several times each year by major credit card companies.
Teaser rates are usually good for three to six months after you receive the card. Rates can range from 0% to 9% and they are beneficial to credit card holders who have large debts on credit cards with higher interest rates. By effecting your credit card balance transfer from the high interest card to the teaser card, you will save big money on interest.
Be sure to remember that most banks treat a
credit card balance transfer identical to a cash advance. Also, the transfer may be subject to daily interest fees, which can add up quickly and often there is no grace period where interest isn't charged. The costs of effecting a large credit card balance transfer in these cases can be astronomical. Try to choose a teaser card that waives transfer charges for balance transfers in the initial promotional period.
Always read the fine print when applying for a credit card. Be aware of the term 'flat balance transfer', which will cost you fees on any credit card balance transfer. You must be knowledgeable of the cost of all balance transfers. If you find nothing on the credit card application, ask a banking representative if there are any flat balance transfer fees.
Take advantage of the credit card grace period. Transfer the balance on your high interest card to the teaser card before the payment due date that appears on your bill. Most credit card companies offer a grace period of between 25 and 30 days. After the due date, interest is charged on the outstanding balance.
If you effect your credit card balance transfer before the due date, you will save money on interest. Some credit card companies offer no grace period. In this case, you are charged interest from the moment you charge an item or from the day you transfer your balance. Do not apply for credit cards that do not offer a grace period.
After you have transferred your balance to the low interest teaser card, you will receive a bill with a payment due date. Always pay before the due date and always pay more than the minimum payment, which is the lowest payment you can make if you wish to keep your card and your credit history in good standing.
Credit card companies are ecstatic when you only make minimum payments. Why? Because minimum payments usually pay only the accrued interest or a portion of it. That means that the principal remains at the same amount that it was before you made your payment. This is the way that credit card companies rake in huge profits. Minimum payments extend the principal amount for months or years.
Each month you pay a minimum payment, it is taken off the interest. The following month, the credit card company charges the interest again and you pay it - again and again and... Well, you get the idea. If you pay only the minimum payment, it will take years to pay off credit card debt.
Balance transfer credit cards are a good short term strategy, but don't use it over an extended period of time. Be sure to check out all options before playing the balance transfer game. If not, you will find that you have created a financial nightmare that has no end.
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