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Balance transfer cards represent a very good deal for those who have a bad credit and a large outstanding balance. If used properly, balance transfer credit cards can be used effectively to repair bad credit history and improving your credit rating.
No Interest initially
Once you transfer balance to the new card, you wouldn't be seeing massive interests adding up to your outstanding dues month after month. Therefore your outstanding due doesn't climb up for a fixed period of time. This will give you a very good idea about how much you need to pay at the end of the month, to clear the entire outstanding balance before the introductory period is over. You can plan and budget bill payments better and the stable amount will also provide enough motivation to get rid of it, instead of dealing with ever changing amounts due to astronomical interests.
Additional credit line
If the credit limit of the balance transfer card is equal to that of the older card, for example, then your credit limit effectively has been doubled for the same outstanding balance. This means your credit utilization has become twice as better, which augurs well for your credit rating. Credit rating goes up if the difference between the outstanding balance and the credit limit is high and vice-versa. Therefore the additional credit line will improve your overall credit history.
Chance to reduce your APR
If you are transferring your balance to another credit card, going for an offer with lower APR than your current credit card will help you improve your credit history. If you have missed your bill payments in the recent past, there is a good chance that your APR has been increased by the credit card issuer as a penalty. Therefore balance transfer card if chosen well can offer you respite from the high interest rate not only in the promotional period but also once the promotional or introductory period is over.
Balance transfer will allow you massive savings
Not only will a static outstanding amount help you plan better, it will also help you pay off the debt sooner. If your outstanding is 1000 dollars and the APR is 24 percent for your existing card, you are paying 20 dollars per month as interest. If your introductory 0 % APR offer is valid for one year, you save 240 dollars which gets effectively reduced from your outstanding due. Therefore the money paid as interest can instead be used to pay off your outstanding balance, thereby reducing the interest paid on it too, once the initial period is over.
Balance transfer card offers you a motivation to pay off your debt within the introductory time period. If you can plan it wisely and keep paying the monthly dues, then your credit rating will improve as a result of your consistency. Consistent bill payments not only helps in getting rid of outstanding balance but also improves credit history, opening up better opportunities and credit cards for the future.