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One of the most discussed topics by most people is the need for balance transfers on credit cards. While there are a lot of people who feel that this would work to the benefit of the consumers, there are an equal number of people who feel that there are a lot of drawbacks to this procedure. Though each of them may have reasons for their opinions, let us take a look at the real picture. Let us take an unbiased look at the advantages and drawbacks of opting for this procedure.
Let us first take a look at the benefits that come with the turf. The balance transfer will prove to be the wisest thing to do if your current credit card issuer has decided to increase the interest rates on your card. Sometimes, the rate increase will be so steep that your outstanding balance, and hence the monthly payments, will increase significantly. Opting for balance transfers on a newer credit card with much favorable terms will prove to work in your favor in times like this.
There are credit cards that make customers pay through their nose by levying high fees on them. Some of the most common fees are the late payment charges and high annual fees. In addition to this, there are credit card lenders who charge a no-activity fee on the account if the customer holds their card but does not use it. If you find yourself to be a victim of high and unreasonable fees on your credit cards, going in for balance transfers will prove to be very beneficial to you.
Another wonderful aspect of balance transfers is that it gives you an option to bring all your existing debt under one umbrella. If you have dues on more than one card with high interest rates, then, it makes sense to consolidate all of them and opt for balance transfer on cards that have great offers on them.
Though there are a lot of benefits to this process, there are a few drawbacks that need to be mentioned as well. First of all, if you go in for balance transfers on cards that do not offer any promotional benefits, then you will be on the losing side. What would have proved to be beneficial might in fact increase your financial liabilities.
It is also important to know that going in for this transfer can have adverse impact on your credit score which has a crucial role to play in your financial well being. If the amount you want to transfer onto the new credit card is above 30 percent of the limit offered on that card, then, you credit score is bound to be hit negatively. The bank will report over 30 percent of the outstanding balance to the credit bureaus which will, in turn, use it to calculate your credit score.
Going in for a balance transfer is a very important decision. You will have to weigh the pros and cons carefully before proceeding further. A wrong step and you will end up regretting your decision for a long time; a right one and you will be off on the right track to being happy.