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Research: Understanding how balance transfer cards can be of assistance -

Clearing off debts is very important in order to lead a trouble free life, without the pressure of repairing the credit scores and the advantage of qualifying for loans when needed. Credit card interest rates are the biggest contributing factors for the credit card debt accumulation. Because of high interest rates, sometimes as high as 35%, even a single missed payment or partial payment can throw the balance off the track. Every single time the balance is not paid in full, credit card user ends up paying much more than the actual bill amount, because of these interest rates. When the outstanding balance is very high, paying in installments every month is going to cause the outstanding balance increase, with the addition of interest rates. When there are no other ways to manage paying off debts in the near future, then resorting to balance transfer scheme may help ease the burden.

Balance transfer scheme transfers the outstanding balance of one credit card to the outstanding balance of the new one, given in the scheme. The old credit card balance will be paid off by the new company, and the credit card account will be closed. Sometimes, the credit card user gets the option of keeping the old credit card, without cancelling the account completely. The best reason to convert to a balance transfer card is because it offers a zero percent rate of interest for a minimum of one year. This zero interest is a boon to people in debt, because it gives them a chance to get out of the interest rate cycle and work towards clearing the debt, without paying extra money. Clearing off the debt when nothing is added to it every month, is easier with some planning.

Although it sounds very helpful and rewarding at first, balance transfer has some disadvantages when looked into thoroughly:

Balance transfers give a zero percent interest rate only up to a year. After that, the interest rates may be even higher than the previous card owned. While checking the balance transfer card, it is important to enquire about the interest rates after the interest rate free period.

If any new purchase is made using balance transfer card, and the money is paid at the end of the billing cycle, the money will still be used to clear off the debts from the previous card. This means that the new balance on the card will start accumulating interest until it can be paid for. Buying anything new while the old balance exists is almost impossible using the balance transfer card.

Balance transfer cards may not be as equipped as other cards when it comes to reward schemes. There may not be any reward scheme at all for the new credit cards issued and even if there is, it may not do much to the credit card user.

Keeping the old credit card may help a bit, if finances are managed well. The new purchases can be made using the old credit card and can be paid for on time. Using debit cards for some time until the old balance is cleared off is a good idea too.