When Credit Card Balance Transfer Is for You

When Credit Card Balance Transfer Is for You

by Ajeet Khurana

There was this one time when my friends and I got to complaining about how our credit card debt kept piling up. There are the monthly insurance premiums, mortgages and car loans to think of, and we were not sure if our salaries (combined with our respective husbands' salaries) could take any more load.

A balance transfer was at the back of my mind, but I did not have enough knowledge about it to even have the courage to bring up the topic. However, I was fortunate, for I had a friend working in a finance company who was willing to show me the ropes.

What is a balance transfer? If you have not been able to pay for your credit card debt, you can transfer the balance to another card issuer. This would help you to get out of paying a large sum as a late payment penalty. Many people opt for balance transfer because another issuer is offering lower interest rates.

In what way does balance transfer help you? If you have been unable to pay off your credit card balance, it is most likely that the finance charges are adding up to your debt on a monthly basis. You could make a new beginning by transferring your balance to another card.

You do not have to worry about being charged with late payment fees as long as you keep paying for the minimum amount due every month. It is always better if you pay more of course. People who are looking to add to their savings, should make an effort to find a low-priced balance transfer credit card.

How do I find a good balance transfer card? Ideally, you should start sifting through the many providers that offer balance transfer facilities. Make sure that their interest rates are much lower compared to your old card issuer - it's possible to get 1% to 2% interest if you take your time negotiating and researching for a reputable company.

New banks tend to be willing to offer customers balance transfer cards free of charge. Some will give you a grace period of six months to a year, where in they charge a lower interest on your transferred balance. Because these card issuers want your business, they will be more than happy to accommodate you. You could end up transferring your balance in less than four weeks.

Could there be an adverse impact on my credit? This is the tricky part. If you are just going to transfer the balance to another card, your credit score is safe. Some say that it is better to close the old credit account, but that is not true in most cases. Not only does part of your credit history get "erased", your debt ratio will be affected negatively especially if your new card has a lower credit limit.

On the other hand, having an open bank account will also affect your credit score, but not as much as closing it. The best thing to do is to keep both accounts open. It is up to you whether you want to keep using your old card or discard it entirely. Just remember to be diligent with your payments on both cards.