Credit Card Balance Transfers Explained

What is a balance transfer ?

A balance transfer can be explained simply as a balance transfer! When a balance is transferred usually from a credit card, but possible from a bank account or loan to a credit card with a offer interest rate (usually 0%) for a set period. It does not have to be the entire amount. The card receiving the balance will an interest rate for a set term, normally 6 months, but can be 9 months or even a year. Take a look at the current balance transfer deals currently available. This will give you a flavour of the typical kind of deal available.

Should I apply for a balance transfer ?

It is important to remember that a balance transfer does not mean that the debt has gone away. It just means you are not paying interest on it. You will still have to maintain payments.

This may seem obvious but many people do not get this straight in their mind.

The basic criteria for getting a balance transfer is when you regularly have an outstanding balance after making your monthly payments. This is the amount you should look to transfer to another card. This will mean that for the period of the offer you will pay no interest on the balance (provided you make the minimum payments).

You should be very wary of taking up a balance transfer, if your overall debt is increasing. A balance transfer is not a green light to spend more money. The money you save should be used to decrease your debt.

What should I look for in a balance transfer ?

You need to be aware of the following when looking for a balance transfer card

Good things

• Length of offer period.



• Offer Interest Rate.



• The zero or low interest rate charged on the balance.



• Possible transfers from loans and overdrafts.



• On some cards you can transfer from existing loans and overdrafts and still get the offer.

• Cut-off period for the balance transfer offer.



• Hidden Charges on transfers.



• Some banks will charge a handling fee on the balance transfer.

There is usually a cut off point from the account opening when the offer is no longer valid. Be very aware of this otherwise you could end up transferring a balance to a higher rate !!

What about new purchases ?

Unless there is also a 0% interest rate on new purchases then you should avoid making new purchases on a balance transfer card. This is because the banks will look to reduce the balance transfer debt quicker than the new debt. Provided your credit history is reasonable, there is nothing stopping you having several cards for different purposes. A good way is to have a card, which specialises in 0% on new purchases and another card for balance transfers.

What happens when the balance transfer period finishes ?

When the balance transfer offer period finishes the debt will revert to the typical variable APR. The lenders hope at this point that the cardholder will retain the card and some of the debt, so they can then start charging interest and making some money! So take into consideration the low interest rate credit cards. However, there is nothing stopping the disciplined credit card holder from switching to another balance transfer deal and closing the account. The cycle then starts again. Always allow 6 weeks to 8 weeks before the end of the offer period to apply for a new card. This means you can get the balance transferred to the new card before the lender can start charging the higher rate. You have to be organised to do this, but if you are it does work. People who regularly switch balances are know as card tarts.

The Golden Rules

There are three things to look out for with a balance transfer card

• As mentioned previously, the unsuspecting can get caught out when spending on a balance transfer card.



• Maintaining regular payments. If you miss a payment you incur some penalty, so be aware. To be safe set up a direct debit.



• The interest rate applied when the offer period finishes.

Neil Brown is a freelance writer and regular contributor to the credit card sites Choose A Credit Card and Search4 Credit Cards.

RTE.ie
Citi writes down bad assets amid big losses
The Australian, Australia - 8 hours ago
Still, Friday's results from Citigroup also signalled that credit problems are spreading to a wider array of loans around the world. ...
Credit Costs Weigh on Citigroup Wall Street Journal
Citigroup credit default swaps narrow 15 bps-Phoenix Reuters
Ford's Financial Services Business About to Enter the Red Seeking Alpha
Wall Street Journal Blogs - New York Timesall 478 news articles

My credit? Let's talk about my sex life instead
MarketWatch - 4 hours ago
But it might be because they just don't understand all of it -- the credit part, that is. A pair of surveys in recent weeks found that 82% of people are ...
Credit cards swept up in the downturn Chicago Tribune
Bad Credit Repair Counseling Helps istockAnalyst.com
The rising cost of debt Akron Beacon Journal
Daytona Beach News-Journal - Chicago Tribuneall 12 news articles

Reuters
Credit seen drying up for small business
Reuters - 5 hours ago
By Nick Carey - Analysis CHICAGO (Reuters) - As losses mount at American banks and the pain of the credit crisis spreads from housing and finance to the ...
Big companies delay suppliers' cash Times Online
all 9 news articles

The Southern Ledger
Paulson: Banking system sound, deposits protected
The Associated Press - 7 hours ago
WASHINGTON (AP) — The treasury secretary says the list of troubled bank will grow longer as they struggle to cope with big losses on bad mortgages. ...
Credit unions echo banks: Your money's safe with us News & Observer
Area Banks Still Financially Sound Wheeling Intelligencer
all 172 news articles

Find credit cards' best rewards
Chicago Tribune, United States - 16 hours ago
Struggling US airlines continue to make frequent-flier programs less attractive, which means that if you have an airline rewards credit card, this might be ...
Zero Interest Credit Cards WebWire (press release)
The Benefits of Having a Credit Card istockAnalyst.com
all 10 news articles

Gold May Rally as Credit-Market Turmoil Spurs Demand for Haven
Bloomberg - 3 hours ago
By Pham-Duy Nguyen July 21 (Bloomberg) -- Gold may rise, rebounding from the first weekly decline since mid-June, as credit-market losses by financial firms ...

Police credit faith-based patrols, more officers for fewer Black ...
Indianapolis Star, United States - 4 hours ago
By Tania E. Lopez Police credit faith-based community patrols and beefed up foot presence for avoiding major incidents at this year’s 38th Annual Summer ...

The Money Times
JPMorgan bests forecasts but sees US credit worsen
The Associated Press - Jul 17, 2008
However, JPMorgan Chase, like its weaker competitors, still has a tough environment to slog through as the aftermath of the mortgage and credit crisis ...
Ackermann says credit crisis end in sight Financial Times
JP Morgan: The Legacy of the Credit Crunch Wall Street Journal Blogs
Fair Game Borrowers and Bankers: A Great Divide New York Times
guardian.co.uk - Wall Street Journalall 515 news articles

Emirates Business 24/7
Woes of US credit crisis: lack of regulation?
Hindu, India - 1 hour ago
Reeling as it is under severe credit market defaults, the US has come to contend with a series of banking failures for the past one year — of the kind and ...
Satyajit Das: Bank earnings - The `V`, `U` or `L` Recovery Business Standard
all 36 news articles

Credit Suisse upgrades Indiabulls Real Estate to ‘neutral’ from ...
Economic Times, India - 21 minutes ago
Credit Suisse has upgraded its rating on Indiabulls Real Estate (IBREL) to ‘neutral’ from ‘underperform’ on valuation grounds. The new target price of Rs ...

Wind Chimes and more...

Windchimes for great gifts!

Top 5 Reasons To Check Your Credit Report Regularly