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Research: Using Balance Transfers the Right Way -

In the credit driven economy today, schemes offers, discounts and incentives rule the roost. Some will help us in many ways and others lure us into spending more. Balance transfers are schemes that have a little of both. In a balance transfer plan, the outstanding balance on the old credit card is transferred onto another new card, often at 0% percent interest. The 0% interest however, holds good only for some specified period before high interest rates are applied back. Balance transfers can either take place between two accounts in the same bank or between two credit cards from different credit unions.

Balance transfers, if used correctly will definitely be to your advantage in clearing unpaid debts. Using the 0% interest correctly is the key here. Credit card companies offer 0% interest on the first 6 months of the new credit card. This means, any payment you make towards the credit card will directly be utilized to repay the outstanding balance. The best way to make most of this scheme is to make as little purchase out of your new card as you can, since new purchases can add up considerable sum to the outstanding balance.

Though Balance transfers are good schemes, choosing the credit card carefully is very important. Terms and conditions of balance transfer schemes are usually little tricky to handle. Generally, though the card offers a 0% interest for several months, the interest rates on the new purchases will be too high. The interest rates and late fees on non payments and partial payments are also set higher than the regular cards. Also, some cards can have conditions that revoke the entire offer on a missed payment. So reading and understanding the terms and conditions of the credit card company is a very necessary step.

Balance transfer schemes are mostly offered by all leading credit unions and banks. Since there are multiple options available, compare the offers carefully and choose the one that suits your needs the most. If you want a card only to clear off the outstanding balance, then choosing the card with a longer period of 0% interest is better than choosing the one with a lower percentage of interest on new purchases. If you want to use the card for other new purchases, and you don`t have a large sum of outstanding balance, then choosing the card with lower rates of interest would be a better option.

Another important factor to base your choice on is the fee you pay for the new card. Balance transfer schemes are generally charged a processing fee or, fee for the new card. Though the interests are offer at a lower rate, if the fee is high, you will end up paying the money that you would save with low interest rates. Plan what is the primary use of the card and compare the processing fee accordingly to make your choice.

When dealing with balance transfers, having a total control over your new credit card is very necessary. Since the interest rates are considerable high for all purchases, and will be on the count after the first six months, careful and healthy credit habits are important. If, balance transfers are not handled with careful planning, it can lead to an increased debt on your credit card, and a bad credit history.