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Balance Transfer is a perfect way to reduce interest charges of your current credit card by transferring an amount balance to another credit card with lower interest rates. There are numerous tempting balance credit cards offering 0% out there and customer get confused on which zero rate cards can really save them more money. Here are some of the questions they ask.
1. What is a 0% Balance Transfer?
This is a technique utilized by most credit card companies to gain more customers. Take a case of a person burdened with a high interest charge credit card account. The person gets attracted to a credit card that offers a 0% rate than his or her current card. Obviously, that person would like to get away from the high interest fees and transfer to a lower interest paying account. The 0% is just an introductory rate, more like a promotional offer. It stays for a few months to a year. There are pitfalls in these transfer cards, though. Some may charge rates on current purchases within the promo period, while others actually ask for fees that are beyond the customer`s contemplation.
2. How do I choose the best balance transfer credit card?
Though there are comparisons websites in the internet, consumers still grow confused on the perfect transfer card for them. Comparison websites do produce numbers, but these rates are submitted by the credit card companies themselves. The numbers and rates presented in the tables of these websites may not be consistent with the other rates and amounts of the other cards, making it incomparable. What you have to do is read carefully the terms and conditions that apply on the cards. The fine prints are the best ones to read because they tell the truth more than anywhere else on the web pages or written brochures. You may hate Math, but knowing your basic interest and compound interest lessons would help a lot.
3. How does Balance Transfer Credit Cards affect my credit score?
Sorry to say this but Balance Transfer hurts your credit score. It forms part in your credit utilization, which makes up 30% of your entire score. Credit utilization, when higher, results to a lower credit score. When you transfer a balance to a new card which usually has a lower credit limit, your utilization will rise, thus hurting your score. Another reason why the transfer could hurt your score is the length of the credit and the application for new credits which accounts 15% and 10% of your credit score. Opening a new account lengthens a credit age and will naturally take off points from your score. Don`t worry; just regain the decrease by paying off your previous bills. It will surely improve your score.
4. What do I have to do to get the best out of my transfer credit card?
It is required that you have the following attributes: self-discipline, commitment and belief. You need to tell yourself of your priorities. Be a good borrower. Always pay on time. And believe you can pay off your credit by sacrificing luxury, working harder in your job and knowing when to stop.