The content is accurate at the time of publication and is subject to change.
The credit card balance transfer is a facility offered by credit card companies, providing customers with the option of transferring the amount or credit due to another credit card company offering a lower interest rate. This feature is attractive to the customer because it allows him/ her to repay credit through a company that offers lower interest rates, loyalty points or a combination of incentives. The customer can effectively reduce the amount payable by constantly transferring from one credit card Company to the next, though some companies allow only a fixed number of transfers. On the other hand, it is attractive to the credit card company because it ensures more customers?
This scheme is especially beneficial for those who have an outstanding amount payable to a company that has high interest rates. By availing of the credit card balance transfer, customers can reduce the interest on their credit loans, transferring to a company with lower rates. However, this does not mean that there is a reduced need to keep expenditure in check. These transfers usually have low interest rates for a grace period, after which rates are likely to go up. Some people see it fit to keep transferring from one company to the other in order to avail of the low interest rates of the grace period. It is safer to plan payments in advance as on-the-spot- decisions where bank payments are concerned is always risky and may prove more expensive in the long run.
Generally, there is an annual percentage rate of 16% on most credit cards. The credit card balance transfer makes it possible to find a 1, 2 or even a zero percentage rate. The scheme allows you a grace period during which you can pay an even lower interest rate on the transferred balance. Utilizing this period, a person could potentially open a new account that offers a balance transfer when the old one expires.
Know your free credit balances
There are many situations in which a free credit balance will aid you. A person having a credit card must keep a check of what balance is available on the card. If the person has a margin account with, say, a brokerage firm (which gives out a certain amount of credit to customers to invest) then it's important to keep a check on the free credit balance. Similarly, if a person has a home equity account (or credit) knowing the amount or status of free credit is important. Generally speaking, when a person has an account that allows am amount that can be taken out on credit, its safer to know the status of that balance.
Most credit card companies charge a transfer fee when you transfer a credit balance. However this amount is hardly anything compared to the amount you will save if you transferred credit to a company offering a considerably lower interest rate. Also, some banks charge customers a joining fee or annual fee. These are the hidden costs that stay tucked out of sight in the fine print of an agreement. Make you double check all the details, before you transfer money.
