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Research: Balance transfers provides an escape to defaulting on your credit account -

There was a time when if you did not have the money to pay back your bank for the amount you have borrowed, there would be no recourse available to you. But nowadays, there are a number of options that you can consider. Balance transfers are a very popular means to delay the process of paying back on your outstanding balance.

The first step to take when you intend to do a balance transfer is to open a new crediting account. When you open the new account, you will first need to decide the reason for doing so. Balance transfers can be done under a number of situations. You might not have the money to pay for your outstanding balance and might be in need of more time. or it could be that you might want to shift to a lower interest rate in order to pay lesser on your borrowed principle amount.

If you are doing a balance transfer because of the former, then it does not matter what sort of account you get for doing the balance transfer. But if you are doing it because of the latter reason, you need to shop around for a low interest rate crediting account. Once you do this, you can go about transferring the outstanding balance to the new account. Also be on the lookout for crediting accounts that give you a holiday on interest pay back for a certain period during the initial months. If you are lucky you might land one such account and this will give you sufficient time to sort out your finances.

But before going for a balance transfer, you need to be aware of a few things. The first thing to remember is that you must not make it a habit and learn to manage your finances better. Because if you keep doing it, the banks will take notice and you run the risk of the crediting bureaus reducing your credit score. Also make it a point not to close the old crediting account, because if you do so your debt to credit ratio will go down and this will adversely affect your credit score. You need to keep your dent to below thirty percent of your total credit limit.

If you close one crediting account, your total credit limit will go down and so will your debt to credit ratio. Also make sure you do not start spending on the new crediting account before clearing your outstanding balance first. You might be tempted to start making purchases on the new account because of all the offers that might be extended to you by the new account which will entice you to make purchases on the pretext of giving you points or rewards. Make sure you do not fall for all this and first pay back whatever you owe to the bank before going around making more purchases.

It is very important that you learn how to manage your finances before going about your regular routine. Making a balance transfer should not become a small chore that you perform every time you get into a mess. It does have a lot of consequences if done repeatedly. Use it wisely and only to get out of a mess that you are sure of not getting into again in the future.