Low Interest Credit Card: Balance Transfer Offers Lower Card Payment

Low Interest Credit Card: Balance Transfer Offers Lower Card Payment

Posted in Articles by Jessica

Low Interest Credit Card: Balance Transfer Offers Lower Card Payment


Learning about credit card consolidation is one of the best things that a credit card owner can do. It is considered to be one of the best ways to come out of the stockpile of credit card bills that have long been plaguing you. While you can just completely stop using your credit cards, talk to your credit card company and negotiate with them or try to make extra payments every month. Either way there are better options that you can look into. Balance transfers and debt consolidation loans should be your top choices; with the former literally paying off your Credit Card X with your new Credit Card Y. Just remember to look into the new interest rate and balance transfer fee before you sign up for anything.

Balance Transfer Fees – Understanding This Term

Balance transfers are effective means of moving any unsecured debt balance to new creditors that are willing to offer lower interest rates. You should still be careful even when you are offered a seemingly low rate. Know that a balance transfer is good for life just as long as you avoid default triggering occasions.

Balance transfer fees have skyrocketed with the recent economic recession. In the past, it capped at just $50 for every transaction. These days, the caps can now be as high as $300 or more. There are even some creditors that have decided to remove the balance transfer fee cap altogether.

If you are calculating savings, you can still be justified to do a balance transfer to decrease your finance charges. There are a few rate offers that are just too good to pass up especially when you are trying so hard to pay off your credit card debt.

What most people do not realize is that there are also dangers associated with balance transfers and these are the fees which become an added part of the minimum monthly payment. These fees can easily double or triple your minimum monthly payment the following month. If you are not able to deliver the minimum payment for that month, then you are likely to forfeit the low rate which you signed up for in the first place.

This is how balance transfer fees work and your minimum payment is calculated by putting together all the fees, finance charges and a percentage of your credit card balance.

Read the terms before you complete your balance transfer and do not forget to compare credit cards. Prepare to pay for the balance transfer fees so that you can enjoy the low rates that are presented to you.

Introductory Rate vs. Standard Rate

The use of introductory rate credit cards has quickly become a popular way for credit card owners to manage their credit card debts. Introductory rate cards provide borrowers preferential interest rates when they initially sign up for their new cards.

Zero-percent balance transfers offer nil rates on any credit card balance that is transferred to a new credit card. More often than not, there are time limits to this kind of introductory rate. The 0% rate may last anywhere from 3-12 months. The trick here is to move your credit card balance from one card to the next before the offer period expires.

Introductory rates are also known as teaser rates because their chief purpose is to entice the credit card owner to transfer his balance from his current card to the new card. While some may not offer 0% rates, they go as low as they can when it comes to their balance transfer rate offers.

Low balance transfer rates are applicable for as long as the balance remains on the credit card. In essence, this introductory rate becomes the fixed rate just as long as you remain loyal to the company and if you religiously shell out your monthly payments. Peruse the fine print on your credit card balance and find out if the 0% or low rates are applicable only for the balance transfer. Ask the credit card company whether your new purchases will be given the standard rate.

Effective credit card consolidation also means understanding standard rates. Most zero-percent or low interest rates revert to comparatively higher standard rates once the introductory period is over. This can be as high as 15% to 20% APR to the clueless credit card owners. It is useful to find credit cards with low interest rates (around 8% to 10% APR would be a nice figure). See if you can shop for the low standard rate credit cards so that you are assured of non-exorbitant monthly payments.

Other Balance Transfer Uses

While balance transfer is the option given by credit card companies mainly for credit card balances, it would be beneficial to see how you can transfer your appliance, furniture, car or home loans as well.

Say, you are currently holding a card with a credit limit of $5,000, this being the highest credit limit that you have. If you have an existing $15,000 auto loan, there is a high chance that another credit card company will offer this limit upon transferring the balance.

There will always be fees that are associated with such types of balance transfers. Just take note that any fee that is higher than 5% is considered steep. Compare credit cards and see which ones can offer transfer fees that are lower than 5% so that the only thing you should be worrying about is how to pay off the loan in the long run.

Balance Transfer – Should You Try It?

Credit card balance transfers allow you to move credit card balances from high interest cards to ones with low APR. This means extra savings every month as soon as you begin paying with a lower interest rate. And what if you have already maxed out a handful of your credit cards? Consolidating the balances on your cards is a means to a trouble-free financial life. Instead of paying two or more credit card balances, you now just pay for one each month.

Now that you know all these things, the next best thing to do is to find credit cards with low interest rates and take the time to compare each.


 Image (CC) Bljunk

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