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Balance transfers are offered by many credit card companies to attract new customers and to win over the users of other competitors` cards. For the same reason, balance transfers usually come with a lot of benefits which could prove helpful if used properly and judiciously. However, one should keep a few things in mind before going for a balance transfer.
Balance transfers are not necessarily good for your credit score. True, that balance transfer provides a good option if you have a massive outstanding balance on your credit card but at the same time transferring your balance from one card to another completely will erase out the history. So you should avoid closing the other credit card account completely, especially if it has a long history.
If you have a high outstanding balance, you don`t want to be adding to it through constantly accruing interest. This is why balance transfer really helps. But it is not a judicious idea to go for balance transfers if the other card doesn`t offer at least the same benefits as the older card if not more. It is unwise to take up a credit card for reducing the balance because you need to build a credit history and hence consider the long term benefits of holding to the credit card.
One of the long term benefits involves the APR or annual percentage rate of the credit card. If this is high, the credit card is not worth it because you are likely to end up with some outstanding interest and balance even if you miss couple of monthly payments. Hence this rate should be as low as possible. Balance transfer cards usually offer a 0% APR for the initial term period. What you need to check is the duration of this initial period.
This period fluctuates based on the credit rating of the individual and hence you must be certain as to what term period you get for your credit history without making any assumptions. The last thing you need is a credit card with higher interest rate and the initial term period less than what you have imagined. This will leave you with an outstanding balance. Generally, if the initial term period is less than 6 months, the credit card is definitely not worth taking, although some companies offer an initial period of 18 months, which should be sufficient time to clear all your dues.
The next thing to consider for a balance transfer is whether the new credit card offers 0% APR only on the balance transfers or on all the purchases. Obviously the second case is very helpful and favorable too which is why you should look out for those opportunities before going for a balance transfer. Having no interest for a year on balance transfer or other purchases could be quite a big boost for you to consolidate your expenses, plan the payment and clear your debt sheet before the term period is over. Hence you need to consider all the factors before going for the balance transfers.
