The content is accurate at the time of publication and is subject to change.

Balance transfer is an option that can be used when you run into trouble with credit card debt. If you have spent a lot on your credit card and are unable to pay off the outstanding balance within the grace period, balance transfers can help you tide through the crisis.

A balance transfer card will allow you to move your existing balance into a new card without any interest being applied on it. All you have to do is pay a small balance transfer fee. During the promotional period, you will not pay any interest rate on the balance. But you will need to pay back the outstanding balance by the time the promotional period ends to avoid paying higher interest rates on the balance.

Balance transfers will allow you to slowly dig yourself out of debt if done in a judicious manner. But care has to be taken to ensure that it is not taken for granted. Making a balance transfer very often will reflect badly on your credit record and you might not be able to get one more than a couple of times. The new credit card company will obviously look into your record and will find that you are using it as a means to escape the inevitable which is to pay back the outstanding balance.

Now let us look at an example of how balance transfers can free you from the clutches of credit card debt. If for instance, you have a $1000 balance on your card with an interest rate of 25%, you will be paying around $20 a month in interest. And you will have to pay a minimum amount every month which will be around a $100. That adds up to around a $120 every month. Now if you transfer that balance onto a new card with a 0% promotional interest rate, you will pay nothing in interest. And the minimum due every month may be just around $50. This was just an example, but if your outstanding debt is around $10000, you will really start to feel the pinch.

The first thing you need to think about when going for a balance transfer is the promotional interest rate period. This will give you an idea about how long a time period you will have to pay back the outstanding balance. Only when you know the period can you plan out your financial moves.

Secondly, find out what the interest rate is going to be after the end of the promotional period. This will give you an idea about how much you will need to pay if you are unable to repay the loan. And if you need to use the card after repayment of the balance, you will need to get one with lower interest rates.