Should You transfer Your Credit Card Balance ?
Many people confuse a debit card with a credit card they are in fact very different in nature. When a purchase is made with a debit card, the money is immediately removed from the card holder's bank account. When a purchase is made with a credit card they have around 45 days grace before they have to either repay the amount in full or make a minimum payment towards paying off the total spent.
Another piece of plastic that differs from a credit card is a charge card the most common charge cards available are American Express and Diners cards. In the case of charge cards there is again a grace period of around 45 days before the money needs to be repaid to the card company. Unlike credit cards, charge card payments need to be made in full each month.
For example with a credit card if you spend £100, you may opt to pay back £20 at the end of the first month. With a charge card, you do not have that option if you spend £100 at the end of the month you must repay the £100 in full there is no option to pay less, there is also no interest involved.
One option for credit card holders to control the amount that they pay in interest is to consider transferring the balance they are holding on one card onto another credit card that has perhaps a zero interest rate for a period of time or alternatively a lower permanent interest rate.
Zero interest rates commonly referred to in the business as a “teaser” rate is intended to draw in new customers to a particular credit card. These teaser rates are usually very limited in the length of time that they run for the generally three or six months is the standard amount of time that zero interest is offered to a new card holder.
The advantage of transferring the balance from one card to another is fairly obvious especially if you are dealing with a level of interest that you are finding it hard to cope with. Zero interest is obviously far more attractive than several percent interest which can add a very large amount on to your minimum monthly payment and onto your total outstanding amount.
One drawback with teaser rates is that they do not last for ever, it is therefore absolutely essential that you read the small print and discover exactly what the interest rate will be once the zero rate period has ended.
This is in fact the most important aspect of moving your debt from one card to another. You must weigh up in your own mind how much of an advantage zero rate is assuming that the new card has a higher rate after the teaser promotion has ended.
Very often, you will find that in fact the interest rates are at least similar if not virtually the same. However, if you are not careful you can also discover that the proper interest rate is in fact far higher than the rate you were paying previously which would make it overall a very unattractive deal.
Don’t Ignore Credit Card Transfers
Moving your credit card balance from one company to another can offer several advantages not least of all the advantage of the low interest rate introductory savings that can offer the card holder a real and substantial saving on the total amount of interest they will have to pay on the balance.
It is often a very good idea to be open to the concept of moving your credit card balance from your existing card company to one that is offering attractive interest rates. When used wisely credit card transfers can bring very significant financial savings, over what the card holder would have paid if they had stayed with their existing card company.
One advantage of finding another company that will offer you a lower annual percentage rate, known as APR is that you will be paying a considerably lower rate of interest on your outstanding balance. In fact, you could well be paying a zero interest rate for 3 to 6 months or possibly even longer.
If you are careful with the use of the transfer, it can also help to more quickly reduce your outstanding debt. For example if you were paying £50 per month off your credit card, you would probably be paying more than £20 in interest. By moving your balance to a card with zero interest if you continue to pay £50 per month all of the £50 will be deducted from your outstanding balance rather than just £30 with your original card.
A very good use for credit card transfers is to move money out of store cards, these cards that are issued by retailers such as clothing shops or DIY warehouses usually have extremely high rates of interest. The rate of interest may in fact be twice or three times what they regular credit card is charging. Therefore moving your balance would be a very sensible option.
Another reason to move your card balance is if the new company is offering a lower permanent interest rate, which again could save you substantial amounts of money over the period that it takes you to repay the amount in full.
Another reason to move your account balance is if the new company offers some kind of rewards scheme or has a good cash back offer in operation. You may also be able to make use of other schemes from a different credit card company such as air miles or some other kind of points system that gives you something back for the interest that you are paying.
Whatever you decide, it is always worthwhile to check out the possibilities of credit transfers rather than just throwing them aside and assuming that they are not suitable for you.
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