Balance transfer credit cards can be both beneficial and troublesome depending upon the ways and habits of the card holder. It could be used to get rid of outstanding debts and also build a good credit history. At the same time, balance transfers could end up as a negative mark on your credit file, especially if you indulge in them frequently. It could also land card holders in greater trouble if they do not manage their finances well.
Balance transfer should not be used as a medium to escape from one debt to another. This will create a negative impression on your credit file. Instead, one should go for a balance transfer only rarely, when there is financial sense. A good balance transfer offer allows you to cut down on your debt and get better terms than your existing credit card. Similarly as per the new credit reforms, a card issuer needs to give the card holder a 45 day notice before interest rate hike. The card holder can either accept the hike or repay the outstanding dues and cancel the card. In such a scenario, balance transfer could be a very good option.
Balance transfers could prove profitable when one can get a good introductory offer. A lot of balance transfer credit cards offer very low or even 0% interest rate during the introductory period. This gives the card holder breathing space to repay the debt without being concerned about spiraling interests. Hence, one can benefit from a balance transfer, if there is a 0% introductory offer for 6 – 12 months thus waiving off interest completely. The greater the debt, the more is the saving for the card holder.
There are very attractive balance transfer offers that are offered during the festive or holiday season. If you have budgeted to spend a stipulated amount of around $500 for the holiday shopping, for example, you could go for balance transfer credit cards which offer handsome rewards. Also some balance transfer cards offer a $100 rebate if the card holder manages expenses of over $400 - $700, varying from one card to another. Such rewards will ensure that you benefit positively from the balance transfer. Moreover, make sure that the new credit card has a lower or equal interest rate compared to the previous credit card. Only, then will it make long term financial sense.