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With the passage of time, an increasing number of people are opting for balance transfers on their credit cards. While most of them do it because there are many others around them doing it, only a handful of them are really aware and knowledgeable about the reasons for opting for balance transfers. The reasons for consumers to opt for this can be wide and varied. Let us take a look at some of the most common reasons for which people go in for it.
When consumers apply for credit cards, they are offered a lot of promotional offers and freebies along for the certain span of time. Unfortunately, at the time of applying for the card, most people do not ask the executives about the duration of the promotional period. Also, they do not ask the bank about the rate they will be charged once the promotional offer elapses. As a result, when the promotional period elapses and the normal APR is applied to their balance, most of them experience an unpleasant surprise since their outstanding balance increases significantly. The next decision, which they feel will bail them out of this situation, is opting for a balance transfer on another card.
In addition to this, banks start off by offering consumers lower interest rates for the first two years. However, as the years fly by, the rates begin to increase and at times, are beyond the reach of customers. In situations like this, affected consumers feel that it is time for them to let go of the cards that are charging them an arm and a leg and opt for balance transfer on cards that are most affordable.
The third reason for customers to opt for this procedure is when their current bank makes changes that are not in favor of the consumers. For example, there might be a sudden change in the rewards offered on the credit cards or the terms of points' redemption may change. In such cases, when customers feel it is not going to benefit them in any way, they opt for balance transfers.
One of the main reasons is to clear off the debts on the credit cards faster. When you opt for a balance transfer from one card to another that offer favorable terms in respect to interest rates, then, your existing balance automatically drops. Also, since most banks are now offering 0% interest on the transfers, it becomes faster to clear off the debts since you will not incur any interest on the outstanding amount. This will, in turn, benefit your credit score and hence the credit report.
All these put together will help you establish a healthy financial life. While there are indeed a lot of reasons to go in for balance transfers, you should understand that you need to be careful while choosing the card on which you will go in for this. A wrong decision made at this point will prove to be very costly in the long run.
