Balance transfers are an ideal way to ensure that you do not fall into a financial trap. They can give you a lifeline when you most need one and it is important that you use it with care and diligence. As with anything else, it is important not to abuse balance transfers.
But before we go into how balance transfers can be helpful to you, we shall first talk about what balance transfers are in the first place. Balance transfer involves transferring all the outstanding balance on a certain credit card onto a new credit account. This will involve opening a new account first. And after opening the account, you will have to make a transfer of all the balance onto the new account and get written documentation from both the new account and the old one for your own records. Once this is done, you will have a lot more time to make a pay back.
The reason that you get a lot more time is because the new account will have a initial period during which the balance will still be borne by the bank. And if you are really lucky and have a good credit record, you can even expect to get a credit account which will give you an interest free period which will range between six months to one year at times. This is a really good deal considering that you will have a long time to make a pay back. And you do not even have to worry about any interest on the amount during this period. These sort of deals are given to people who open new credit accounts just to encourage them to start using it in order to create more business for the bank. It also generates good will for the bank from your side.
Balance transfers are a good way of getting out of a financial crisis. But if you do it too often, it can affect your credit score. doing it once or twice will in fact increase your credit score given that you will have an extra credit account in your name. but it is important that you use it judiciously. Splurging on the new credit account will only add to your outstanding balance. Make sure you do not do this even if you are tempted to do so for the sake of points that you may accrue from the bank.