What you need to know about balance transfer credit cards

In its basic sense, balance transfer
credit cards are used to accommodate available balances that have
been transferred from another card – a process known as credit card…

In its basic sense, balance transfer
credit cards are used to accommodate available balances that have
been transferred from another card – a process known as credit card
balance transfer. It is somewhat similar to debt consolidation loans
except you use a credit card instead of a third party loan company.
And it is a practice actively participated in by consumers because
they not only get to maximize their resources; they also get to save
cash as well as take advantage of loyalty points, low interests or
interest free-periods. Now, this process, attractive as it is, can be
a source of controversy given that the previous credit card company
is set at a disadvantage.

Usually, when a credit card balance
transfer is made, all outstanding balances will be arranged
accordingly in a way that the low-rated and fixed rated ones are paid
in place of the fees with the higher interests. This makes it much
easier for people to resolve their debts. And if they avoid taking
cash advances and making purchases through their new card, they might
even walk away with some savings.

There are times when balance transfer
credit cards are made to answer to a number of maxed-out credit
cards. This is good because one by one, it may become difficult for
you to keep up with the obligations. If you just have one particular
debt to keep track of, the risk of missing payments per month is
minimized.

The downside to availing of this
technique is that you will have to go through the application process
and pay fees for the transfer. These vary between banks, but there as
some that implement a baseline of 3 percent of every $1000
transferred. However, if you search thoroughly enough, you will be
able to find providers that have lifted this service levies. Another
thing you have to watch out is the possible expiration of low teaser
interest rates. Often times, they are only valid for six to nine
months, which means you have to resolve your credit by then. If by
chance you miss a payment a day late, you might have to suffer grave
consequences. On top of that, they are conditional too and some
balance transfer credit cards will not extend the same generous
courtesy to new purchases made.

But what probably is most challenging
about the process is the fact that you don’t have the privilege to
transfer over and over again. Bottom line is, if you do it once with
a particular provider, you have no choice but to stick to it until
the debt is resolved. Otherwise, you might end up sacrificing your
credit score. You can’t just apply for a new balance transfer card
when the perks of the previous one expires so you could avoid paying
the real interest rates. Not only will you be piling high debt
levels with new low interest accounts, you will also make it
challenging for you to borrow money in the long run, during an
emergency.

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