Balance Transfer Credit Card

If you've ever been faced with significant debt, you know that the problem has a way of compounding itself. Let's say you're carrying a 4,000 dollar balance on your card and don't have a way of paying it off immediately. Suddenly, the high interest rate on your debt can make your money problems even worse. With some interest rates as high as 20%, it's more important than ever to monitor your interest rates. Balance transfer credit cards, if used correctly, can provide a solution.

Balance transfer credit cards allow you to take the balance from one of your credit cards and put it onto a new card. Why do people do it? Usually, you can take advantage of a very low or nonexistent introductory interest rate this way and avoid paying high charges on your debt. These new interest rates often last as long as six months, which gives you a chance to get back on your feet and begin paying off the debt you've accrued. Applied carefully, these cards can help you save real money.

However, there are a few key hazards you should be aware of. First, balance transfer credit cards frequently have fees associated with them. Some cards measure fees as a percent of the balance transferred, while others limit them to a flat charge usually under $100. It's crucial for you to observe the fee schedule and calculate if your balance transfer credit card will actually save you money. If your debt is significant, chances are a new card's benefits will outweigh its costs. Still, you should always do the math to be sure.

Secondly, you need to note the long term caveats surrounding balance transfer credit cards. Many cards change their fees if you miss a payment, so you should be sure to pay off your balance on time. In addition, it's key for you to mark when the introductory fee on your balance transfer credit card is dropped. Frequently, it can be replaced by a much higher fee. Lastly, remember that you can't apply for balance transfer credit cards forever- the hit on your credit score and finances is unsustainable over a long period of time. Recognize that balance transfer credit cards are a band-aid, not a cure, for your financial woes.

Exceptions aside, these cards are a relatively simple way to fix some of your short term financial problems. If you need a ladder to the next statement or a way to escape your financial spiral, balance transfers are a solution. They aren't permanent- you'll eventually have to pay your debt. But the temporary effects are good enough that you'll have time to improve your finances.