Credit-Land.com is an independent, advertising-supported web site.
Credit-Land.com receives compensation from most credit card issuers whose offers appear on our site.
Compensation from our advertising partners impacts how and where their products appear on our site,
including, for example, the order in which they may appear within review lists.
Credit-Land.com has not reviewed all available credit card offers in the marketplace.
Posted: August 16, 2011 Updated: September 28, 2018
The content is accurate at the time of publication and is subject to change.
Due to the increasing rate of credit card debts, many schemes are introduced by the credit card companies in order to help the people clear their accounts. Balance transfer scheme is one such scheme that helps people clear off the debt without accumulating the ever growing interest amount on it. This scheme is definitely worth considering if the balance amounts have grown over a period of time, and cannot be cleared by the regular bill payments due to the interest rates charged. But like in all other schemes, balance transfer schemes have both advantages and disadvantages to it. All the same, trying out the scheme when no other option is available is worth it any day.
Balance transfer scheme is hugely popular because of the zero percent interest rate that the bank offers. It is due to this that most people will be able to clear off their debts without paying the accumulating interest rates.
Zero percent interest rate is usually extended up to fifteen months in some banks which is more than sufficient to clear off the debt with regular payments. The payment that is made to the account every month goes entirely to clear off the balance which goes on reducing every month.
This helps people manage their debts easily and improve the credit score over time. Within a year, the credit scores will have improved considerably, which makes it easy for people in debt to manage financial crisis.
Because the balance transfer cards cannot be used for any new purchases, it is easy to structure the spending habit, and control the situation from going out of hand again. It is easy to bring the credit card spending habit into discipline during the balance transfer scheme.
It is the best alternative available, since the only other option to get rid of the debt by paying the fraction of the sum is to declare a bankruptcy, which remains in the credit history for seven full years.
Although balance transfer schemes promise interest free rate for over a year, the credit card that comes with balance transfer has very high interest rates after the interest rate free period ends.
If the balance transfer card is used while the outstanding balance from the old card is not yet cleared, is charged a very high interest rate. If the person uses the card by chance, then the whole balance transfer scheme does not make any sense. Until the old balance is cleared off, the newly spent amount keeps accumulating the interest rates.
Balance transfer scheme helps improve the credit rating over time, but it causes the credit score to go further down, while signing up for the scheme. Closing the old credit card causes the score to drop further.
Since the old balance from the old credit card is transferred to the new credit card, there may be some charges or fees associated with it. The interest free scheme applies to the total outstanding amount at the time of signing up for the scheme. This means, the interest rates accumulated up until that time is included in the total amount.
Disclaimer: This editorial content is not provided or commissioned by the credit card issuer(s). Opinions expressed here are the author's alone, not those of the credit card issuer(s), and have not been reviewed, approved or otherwise endorsed by the credit card issuer(s). Reasonable efforts are made to present accurate information, however all information is presented without warranty. Consult a card's issuing bank for the terms & conditions.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.
The COVID-19 pandemic has made significant changes not only in people’s lives and their financial standing but also in the entire financial sector of the U.S. We have collected the best secured card offers from our partners so that you can… Continue reading
When applying for a credit card, you definitely don’t want your credit score to go down. Here, you will find the best credit cards with a soft pull from our partners. An application for such cards won’t make changes to your credit history… Continue reading
We evaluated store credit cards offered by our partners to find the best store credit cards. They are often loaded with perks that will allow you to save on purchases at your favorite retailer. Plus, many store credit cards are available… Continue reading
You've successfully subscribed!
Please specify the following:All these fields are optional
Your Credit History
Themes you are interested in:
By providing this information you help us make our news letters more useful
and informative. Thank you!