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Research: Why Credit Card Balance Transfer not suitable for Spendthrifts -

The credit card balance transfer service maybe a convenient way for consumers such as yourself to lower their interest rates when they use it, but this special feature is not meant for spendthrifts and big spenders. There is a limit to how much you could use this special feature of lowering your interest rates, and this method is most recommended for consumers who prioritize in paying off their debts and settling their other financial issues. This article would explain why this is the case.

The special trick that the credit card balance transfer service uses to lower your interest rates is through its low or 0% interest rate that is available for the first few months that you sign up for the service. When you transfer your funds from one account held by your old credit issuer to a new one held by a different credit issuer, your debts would also be carried over but the interest rate from your old account would be lowered or even nullified according to the interest rate of your new account. For example, in your old account you have an interest rate of 10% that you owe to your credit issuer but that would be lowered to 0% when you transfer to your new account if that is the new rate of your new card issuer. Thus, your debts to your card issuer would be lowered for your convenience.

But as mentioned earlier, there is a limit to how much you could make use of this trick. Even when your interest rate gets lowered or even nullified, the amount of your debt still remains the same and you still have to pay that amount to your credit issuer. So you could not just simply use your new credit account to make purchases and merchandise as much as you want, because that still increases the amount of your debt you owe to your issuers.

Also, that low or 0% interest rate would not be there forever. Remember, that advantage is only available for the first few months after you sign up and once that grace period is over you have to answer to your card issuers for the debt you owe them.

Think of it as this way, this is a challenge between you and your credit card issuer. One in which you have to pay up your debts before the grace period ends, and if you do then you win and you would have settled your financial issues by then. Otherwise, then your issuer would take advantage of your remaining debt and apply the credit card`s normal interest rate to increase the amount you owe them even more. And be warned that your new credit card issuer`s rate could often be higher than that of your old one. So it is practically a race against time and money that you have to settle your debts before the grace period ends.

So if you are the type of consumer who prefers settling your debts instead of using your money for purchases and what else, you could use this system to your advantage.