Having a lot of credit card debt, combined with difficulty in making even minimum credit card payments, is apt to keep many people in debt for a long time to come. Getting a new credit card with a credit card balance transfer option, however, can provide some hope by enabling zero percent interest for up to a year. This means balances transferred earn no interest, enabling the card owner to be able to reduce credit card debt that much faster.
How Balance Transfer Credit Cards Work
A balance transfer credit card will allow existing balances from other credit cards to be transferred to the new card. Generally, this option can often only be done when applying for a new balance transfers card, but some may permit such transfers at other times, as well.
The way this works, says MyFICO (the company that initiated the credit score), is that the new credit card will pay the amount specified to the current card companies, which means that the debt is now paid off. There will not be any extra charges because they have received the payment for the balance owed.
The new credit card company, however, will most likely charge a fee for the transaction, although some cards will not do this. This fee is typically around three percent of the amount transferred, but by shopping around carefully, fees as high as four or five percent can be avoided. Some companies place a cap of $75 on their fee.
Introductory Offers and Balance Transfers Cards
In order to attract new customers, credit card companies will often have what they call an Introductory Offer. Generally, a balance transfer option is part of this offer and it will only last for a specific time period, which could range anywhere from three months up to fifteen months.
Some credit card companies are willing to do this because of the amount of interest that they can charge the cardholder. After the initial period is over, the regular interest rates on the credit card will kick in, and this could easily be as high as 15 or 16 percent interest. Some credit cards, however, do permit the zero percent interest rate to continue on the credit balance transfer as long as any of the balance remains.
Benefits of Credit Cards with Balance Transfer Option
The benefits of a credit card balance transfer are that it gives the card owner an opportunity to avoid additional interest charges during the Introductory Offer period. This period could be a year or longer on some cards, but it is more commonly around six months.
Although a zero percent interest rate is often mentioned in the Introductory Offer, only those with really good credit will be able to get it. Others will most likely receive a higher rate.
Exert Caution with Credit Cards and Balance Transfers
Credit card balance transfers can be very helpful to reduce credit card debt - especially if a low interest rate can be obtained for a year or longer. The small print on many best balance transfer offers, however, is that the credit card company can put the card holder into a high interest rate category for something as simple as being late on one payment. This could be as much as 29 percent, or more.
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Mike Valles - Mike Valles has been a full-time freelance writer for more than six years. He has written thousands of articles and other materials - ...
