Balance Transfer Explained

In order to understand how a balance transfer credit card can work for you, you need to know what a balance transfer is. Basically a balance transfer is when you have one credit card account open that has a balance. This balance can be anything. You have decided that you no longer like the card or you want the balance to be below 50% of the credit card limit. Whatever your reasons you want partial or all of the balance on that card paid off and placed on another card. You open a second card and ask the company to pay off your debts on the other card. This gives you the same balance now on the new card. One of the many reasons a lot of us do a balance transfer is to save on a special rate. Here are a few examples for you to look at.

Current Cards: One the MasterCard you have £4000 at 19%, on a Visa you have £2000 at 17% interest.

You are then going to open a new card, which is another Visa with Barclay. This card offers a 0% interest for the next thirteen months on balance transfers. Now you can look at the two cards you have. Your debts are a total of £6000. Your new card is going to allow you to place the entire balance from both cards onto the new card because they have extended you a credit line of £8000.

Now you are going to ask the new credit card t o transfer the balance from both cards. The company will pay the larger amount off and then they will pay the smaller amount. Now you have two cards that are debt free. You also have a new card that has a balance of £6000, but the interest rate is 0% for the next thirteen months. Obviously this looks better to you because you are now saving money on the interest you would have had to pay on both debts and your also have one monthly payment rather than two.

With most balance transfer deals you have to have a new card. The companies only tend to offer the balance transfer deals to those who obtain their card as a new customer rather than extending the same to those who already have the card. The idea of course is that you will be enticed away from the other company. You will also find that you have only a couple of months to transfer the amounts before you lose the good deal once you have opened the card. Normally the credit card companies say to have the X amount of time on the balance transfer you have to transfer the amounts within sixty days or less. There are a few credit cards that do tend to offer deals to existing customers and you can find those when you look for the best credit cards. You also want to understand that cutting the interest rate is not the same as having no interest rate at all.

Return To Financial News February 2008
A Poorer Credit Card Score Deal
Balance Transfer Explained
Finding a Balance Transfer Deal
Finding the Best Credit Cards
How to Use a Balance Transfer Card
Questions on Balance Transfers
The Best Deal
Top 0% Deals
What Are National Savings and Investments