The importance of zero balance transfer

Tuesday, August 2nd, 2011
Updated: August 2nd, 2011
The content is accurate at the time of publication and is subject to change.

Balance transfer is the process of transmitting the balances between two credit cards, where the outstanding dues are migrated from a card with high APR to a ZERO interest credit card. Several renowned banks in addition to offering debt transfers from the existing cards to the new ones also include transfers of bank loan amount onto the new card for a fixed timeline. Such loans attract 0% or low interest rates.

For those of us struggling with the payment on high interest rate cards, balance transfer credit cards are an excellent choice. Stiff competition and the objective to attract consumers, credit card companies are offering attractive deals on balance transfers. Some card issuers have 0% APR or 0% interest on the balance transfer and they prefer to call it “credit balance transfer rewards”.

How can balance transfer help? Balance transfers come handy when people despite of paying regularly have outstanding dues on their cards. The balance is transferred over a fresh card that carries no interest for a stipulated time period. In order to enjoy the benefit of such a great bargain, you must have paid a minimum balance on the cards before transferring the balance. Nonetheless, balance transfer must not be made a habit, especially when you have mounting debts.

Balance transfer enables you to rebuild your credit history and re-create trust with your bank or financial institution.  More often than not 0% APR on the balance transfers extend for a period of 12 months. However, there are companies that offer 0% APR for 18 months. Availing balance transfer is not a cakewalk; you must first establish and maintain a good credit record. Further, you can close the account to avail the “credit balance transfer reward”, before a higher interest rate begins to apply provided you continue to maintain a good payment record.

With the increasing dependability on credit cards, it has become inevitable for credit card companies to launch new features that make the cards more consumer-friendly. Rather credit card companies have been striving to achieve this, ever since their inception. Even though there are several benefits linked to the zero interest balance transfer, yet you must read the fine print in respect to hidden costs or towards processing handling charges. Also, you must ensure that you pay your monthly installments on time to continue enjoying its benefits. In case if you default on payment and the 0% APR timeline expires, you would have to pay far greater than you would have expected. The benefits on balance transfer cards have strings attached. If you are considering subscribing a zero balance credit card, then you must get your calculations correct, lest you may be in for a rude shock at a later stage.

Before signing up for a balance transfer it is wise to analyze various costs and factors that may lead to loss of benefits. These costs include balance transfer fee, high interest rates post the introductory period, annual fee, and penalties including late and overdraft fees. Since these costs can negate the benefits, therefore you should take a calculated risk.

Since balance transfer is used to get rid of overbearing credit card expenses, hence it has its most innovative use while paying a credit card debt that is coming up very close but you are running short on money to pay it out at that very moment. Thus, if you are expecting some help on you finances at a later point in time, it is best to transfer the existing credit card debt onto a new card that bears 0% APR or low interest rate. You can then slowly pay off the revolving balance once and in for all on your new card. Today, several credit card holders are opting for this unique option to pay their debts swiftly and effortlessly.

Balance transfer can be effortlessly obtained as your financial institution leverages the benefit of getting online and availing this option from there. It comes handy not only to deal with you grave financial situation but also for others whom you want to help – you can have them send their balances onto your balance transfer credit cards. That said, it is a good idea to recommend this unique opportunity to your loved ones.

Shifting balance to an account does not hold true only for credit cards, but also between bank accounts and credit cards. You can use this feature with a bank account that allows you to carry out this procedure. If approved, you can synchronize your bank account with your credit card in a manner that will assist you in making payments on time. Hence, balance transfer is amongst the most useful features of credit cards.

As a rule, balance transfer credit cards provide 0% or lower or introductory interest rates initially, which steeply climb after the cessation of the introductory period. Therefore, you make certain that you pay off the outstanding debt as soon as possible. A good way to do it is to pay back a minimum amount, every month in a manner that the balance is paid off completely before the termination of the introductory period. Remember, if the outstanding debt is not paid in stipulated time-frame you would end up paying much more than you had asked for.

To keep the customers interested in their cards, several balance transfer credit cards companies offer air miles bonus during holiday season. For instance, you may receive $100 discount if you have spend $600 or more during the first quarter of availing services. Sounds a lucrative deal, yet you should be careful of such strategies and avoid splurging just to avail the discount.

We advise you not to close your old credit card account because you will adversely affect your credit rating. Wondering how? Closing your old account will cause a reduction in the available credit limit, and expands the credit utilization ratio. It is a bad choice, if you are considering purchasing a property in the near future.

All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.

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