Want to get an upper hand on your debt? Balance transfer credit cards may well be the way to do it.
Balance transfer credit cards are those that allow you to transfer the balance from another credit card or any other debt at low or no interest rates. Essentially, think of balance transfer credit cards as setting up your own debt consolidation program. Whether it’s balances from other credit cards or the remainder on your car loan, you can put it all into one card, and save with the low or 0% interest rates.
You may be wondering why credit card companies would offer Balance Transfer Credit Cards with no or very low interest. Isn’t interest how they are making their money? Are they just trying to be nice helping you pay off your debt? No. The reality is they don’t expect you to pay off your debt during the time period they are offering the special low interest rates. Once that time period is over (usually 6, 9 or 12 months), they’re going to hit you up for their regular interest rates. You need to find out what these rates are going to be to know how much you may be paying down the road.
With that said, balance transfer credit cards can really be a savior to someone who is buried under a lot of credit card debt. Instead of making a payment that mostly goes to interest and a little to principle, when there is no interest, all of your payments will go to the balance transfers on the card, cutting it down to size much more quickly than you were able to before.
There are a few important things to know before you start using balance transfer credit cards. A lot of people want to start using the card for other charges. While there may be no or low interest on your balance transfers to the card, that may not hold true for new purchases. If they are being charged at the regular interest rates, you will quickly get yourself back into the situation you were in before.
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When you send in a payment, most credit card companies put it towards the items with the lowest interest rates first. That means the new purchases you are making are continuing to accrue interest until you pay the initial balance transfer off.
Also keep in mind that if you are late on just one payment, the whole balance may become susceptible to the card’s higher interest rates.
Balance transfer credit cards can be a great ally in the battle against debt, but also an enemy if you don’t use them wisely. Do your research and know your options before you make a selection.