Balance transfer is a financial opportunity provided to the customers to escape increasing credit debt. Balance transfers if done with proper planning, can save you money. Balance transfer gives borrowers the opportunity to choose a lower interest rate as an introductory offer
. This has therefore become a popular means of saving money on the interest rates that are paid by the borrowers on their credits or loans. When a borrower moves the current balance of a credit card to another, it is called credit card balance transfer.
Do balance transfers help in saving money?
In case the credit card holder is paying very high interests rates for the transactions done with their present credit card, then balance transfers would be beneficial. If the borrower switches his credit card account to a new bank that will offer the same credit card facilities but at a lower interest rate. This will make managing the credit debt easy
, and will also save money as now the debtor will make reduced repayments due to lower interest rates. This further enables the borrower to pay off their remaining balance much faster and come off with a good credit score.
If the borrower is currently running a balance on his old credit card for quite some time, then a balance transfer to a account will present an easier and simpler way of saving cash. This is made possible because the borrower now pays a much lower rate of interest. However, to get the maximum benefits of balance transfer, borrowers need to research throughly and compare the different options available in the market, before making a choice. Further understanding the working principal of balance transfers also makes it easy to choose the best available option.
The three important things that will help in getting the maximum benefits of balance transfer are as follows -
- The interest rates offered for the balance transfer. If the interest rates offered are higher than the present rates that the borrower is paying then the need for balance transfer stands nullified. It is therefore essential that the borrower negotiates with the bank for a better interest rate.
- The grace period for which the introductory offer is made also stands to be a very important factor when selecting a balance transfer credit card. Greater the time period of low interest rate, better will be the chances of the borrower to repay off the loan.
- Some low interest rate balance transfer remains attached with additional costs. These costs when summed up, stands out to be greater than the rebates offered. A borrower should have clear understanding of the other charges that are being levied on the new balance transfer credit card account.