Understand Terms and Conditions- It is wise for all consumers to read the fine print and understand all the terms and conditions before applying for any credit card. This is especially true when moving high balances to a new card. In most cases balance transfer offers include a very low interest rate that expires after the introductory period. Find out what the interest rate will be after that period to determine if moving the balance from your current card is really the going to save you money in the long run. This becomes easier to determine once you factor in the transfer fees that come hand in hand with transferring balances. These fees have doubled or in some instances tripled in recent months.
Understand How Transfers Affect Your Credit- In the past when balance transfer offers were more plentiful and lucrative, some consumers used balance transfers as a way to avoid paying interest all together. If that is your strategy you better think twice before moving balances since opening new accounts will eventually catch up with you as card issuers view your credit history. This can cause a drop in your credit score as well as increased difficulty in securing other types of loans or balance transfer cards.
Consolidate Other Debt- Consumers often begin to feel overwhelmed by the number of accounts they have to keep track of each month. If you have done your homework and the cost of transferring many accounts onto one new card are not exorbitant, having just one monthly payment can make managing your accounts easier. You can also move debt outside of credit cards if you offer includes convenience checks which can be used to pay off other debts. Consider how long you will need to pay off the new debt, keeping in mind the fact that after the introductory period is over you will likely have a higher interest rate on a now higher balance.
Handling Old Accounts- Once you have decided to transfer your balances to a new card, you will have to commit yourself to not incurring additional debt on your older credit cards that are now paid off. Leaving your accounts open will be better for your credit score however many people are tempted to rack up new charges once they have the available credit to do so. The result is you find yourself deeper in debt with more financial burdens than you started out with before the balance transfer.
As you can see, using a balance transfer card can be a good way to reduce debt by paying less interest on your balance each month. By following the tips mentioned you can avoid the negative aspects of balance transfers while gaining the benefits.
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Article Added on Sunday, May 17, 2009
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