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Research: Things to know about credit card balance transfers -

Balance transfers are one of the easiest escape routes out of credit card debt if you ever find yourself in the unenviable position of being in it. But you can do this only if you find the right credit card to do this. There are a number of credit accounts offered by numerous banks and it is going to be very difficult for you to discover the right one if you do not know the basics about balance transfers before going ahead with it.

The first step is to choose the right card. The entire concept of balance transfer is based on the premise that you are going to choose the right card. You must make sure that the interest rate on the card is lesser than that on your current card. There are a lot of banks that offer cards which have a low interest rate for an initial period and then revert to the standard APR. Make sure that the reduced interest rate is for a substantial period of time. Sometimes the banks will ask for admin fees or balance transfer costs. In such cases, it will not be worth your while to make the transfer to such an account. If you are lucky, you can get a credit account with an interest free holiday period. In such cases, you do not have to pay interest on any amount borrowed during a certain initial period which can range between six months to a year in some cases. It is very rare to land such a deal, but if you do make sure that you grab it with arms wide open.

Then the other thing to keep in mind is the impact that the balance transfer is going to have on your account. It is not good to keep doing it over and over again. This can adversely impact your credit score. But if you do it just once, it can in fact increase your credit score. This is because your debt to credit ratio will decrease. Make sure that you always use only less than thirty percent of your credit limit. If you use more than this, you run the risk of being branded as a compulsive borrower. You don`t want the banks to feel this way if you hope to do business with them in the future.

The process of the balance transfer is not complete until all the outstanding balance is transferred to the new account and the old bank acknowledges the same. It has often been the case that the old credit account will still show the outstanding balance while even the new credit account will show the balance. In such cases, you will end up paying interest on two outstanding balance amounts even though you just owe one bank. This can be very detrimental to your all important credit score if you do not discover it in time and address the problem deliberately and in time.