Transfer Card Balance

Most credit card issuers provide interest-free transfer card balance facilities as a means of attracting customers. Even customers stand to benefit significantly from this service, since it enables one to acquire a low interest credit card and other benefits, such as interest-free periods and loyalty bonuses.

 

Individuals with poor credit histories can transfer card balance from a high interest credit card to a low interest one and, consequently, improve their creditworthiness. Other benefits of card balance transfer are:

 

·        Reduces debt. A low interest rate enables one to clear outstanding balances at a faster pace.

·        Facilitates inexpensive borrowing. One can perform successive transfers and optimize interest payments. This could prove cheaper than a personal loan, if managed properly.

·        It is an unsecured debt. Since standard credit card debt does not require any collateral, one can pursue additional debt solutions if the debt level ceases to diminish after the card balance transfer.

 

Some drawbacks of the transfer card balance option are:

 

·        Opens new lines of credit. Sometimes opting for card balance transfer results in over-spending, as the existing credit lines are left open. Consequently, this weakens the credit rating.

·        Limited accessibility: An interest-free card balance transfer is offered to only credit worthy individuals who have not defaulted on any payment.

·        Transfer fee. Most card companies charge a fee for the card balance transfer. This is generally a percentage of the transferred amount, typically around 3%. This gets added to the amount owed, which implies that an individual will not be able to save any money on interest payments during the initial months.

·        Teaser rates: The low interest rates are temporary, usually lasting for 6 to 15 months. Once this period ends, individuals can find themselves paying an APR higher than that prior to the transfer.

 

First, compare the features of different 0% card balance transfer credit cards, with respect to the balance transfer fee and the interest-free period. Thereafter:

·        Read the fine print. Although the credit issuers claim interest-free balance transfer, there may be some fee associated with it.

·        Compare reward programs. Opt for a card that offers reward programs in the form of cashback or airline miles to optimize the credit card usage.

·        Understand the difference between 0% interest on card balance transfer and that on purchase.

·        Establish a plan for the line of credit when the interest-free card balance transfer period expires.

 

Finally, remember not to use card balance transfer for acquiring additional debt.