Credit Card Balance Transfers – Tips

Transferring your balance from one credit card to another has become an important financial strategy and a big business. There are sites on the internet devoted solely to listing the credit cards that would be good candidates for balance transfers. This makes sense, considering that even one or two percentage points on your card’s interest can make the difference between spending or saving hundred of dollars a year.

If you do it carefully, a smart balance transfer can be an extremely positive move for your budget. The most important consideration is interest rates. Of all your credit cards, which one charges the highest interest rate? That’s probably the one costing you the most, even if it carries the lowest balance, because interest charges multiply exponentially and minimum payments continue to increase, creating a snowball effect of charges that can take a very long time to pay off. That high-interest card is your best bet for an effective balance transfer.

Many people constantly keep their eyes open for good balance transfer deals. There are two ways to transfer your balances:

Stick with your current credit cards. If you cut out your highest interest credit card, you can transfer your balance to one of your other credit cards that has a lower interest rate. The advantage of this is that you don’t have to worry about new cards, new guidelines or fees, and new bills to pay. Your balance transfer will get rid of one card and lower your interest all at once.

Apply for a new card with a low introductory interest rate. Many cards have promotional introductory rates of 0%, and even if that rate only hold for a certain amount of time, you can do a balance transfer over to that low-rate card. At that point your best bet it to pay off the entire balance during that introductory period, because the last thing you want is for your new balance to incur higher interest rates once the regular rate of the new card kicks in. That would defeat the purpose of the whole balance transfer!

Remember, with credit cards, the thing that gets people in trouble is the interest rate, so it’s almost always a good move to transfer your balance from a card with a higher rate to a card with a lower rate. Even if that lower rate is limited to a certain period of time, your balance transfer makes it possible for you to pay off balances that otherwise might follow you around for years.