There is much hype and advertising concerning credit card balance transfer in the media. This is largely aimed at existing debt.
Debt is a part of life and many people have needed to use their credit cards to get by in recent years. Unfortunately this type of debt can soon mount up and leave people reeling with a seemingly insurmountable amount to pay back.
Although some may be scared of it, balance transfer is something that anyone only paying off the minimum amount each month, or with a large balance on a credit card, should consider. Many credit card providers offer new customers very attractive opening rates and even interest free periods and interest free balance transfers. This means that a great deal of money can be saved.
Anyone considering taking out a new card with the intention of reducing their debt by the end of the interest free period must remember that they will be charged a fee to transfer their balance.
Fees charged by the new card provider vary, but this one off fee will generally be at a much smaller rate than the monthly rate of interest charged by an existing card. It is also, as the name suggests, only charged once.
Despite this, a debt can be significantly reduced when the total repayment is dealing with the actual capital owed and not paying additional interest.
When considering taking out a new credit card as a debt management measure, it is extremely important for the borrower to be disciplined in their approach. If a new credit card is used to make new purchases instead of reducing the balance owed, then debt will soon spiral out of control.
Credit worthiness is an important consideration for anyone considering applying for new credit cards. If too many applications are made, or too many credit cards are held, this can affect credit worthiness.
On the other hand, anyone looking to try and increase their credit worthiness may also find a balance transfer card helpful. If the terms are stuck to and repayments made on time, then this can be favorable.
Once a balance has been transferred, it is sensible to make sure that the old credit card account is closed. This will reflect on credit agency records and if this is not done, then it can look as though a lot more credit is held than is really the case.
If used widely, transferring the balance of your credit card to another provider to take advantage of good or free rates can work to significantly reduce debt. But this is an ongoing process and should not be done once and forgotten about.
When a credit card provider’s interest free period is coming up for expiry, it is time to start looking around again for another provider. Repeating the process can mean more savings and further decreases in debt.
Before deciding on a provider to switch a balance to from an existing card, it is worth researching who the parent company is. Many providers offer several different credit cards under different names and this could lead to a refusal, which might adversely affect credit records.
Even if debt control is not a problem, borrowers would do well to consider switching card providers. They may be able to reduce their monthly cost of borrowing by doing so.
Balance transfers are a very real solution for responsible borrowers and should be investigated as a method of reducing debt at a very low cost.