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Questions on Balance Transfers

How do you do a balance transfer?  When you are trying to create a balance transfer all you will need is two cards. Preferably you have submitted an application for a new card with a balance transfer deal, in which you get 0% and you must transfer within 30 to 90 days.  You can do a balance transfer online with the card or you can call up and give the account information to the new card verbally and ask for the amount to be transferred.  The credit card company will then pay off the debts of the first card you had and have a new balance on the balance transfer credit card you just applied for.

Having a new lower interest rate:
If you have a new lower interest rate you are not going to be paying less each month.  Instead these are separate entities.  The credit card company sets the minimum monthly payment based on the balance you have as well as the interest rate on that debt.  For an example say you have £1000 pounds with a 15% interest rate.  You will find that the cost to you on this balance per year is 150 pounds.  The minimum payment doesn’t always change, but is based on what the company sets to make sure they make the interest as well as you paying down the balance.  Some cards offer a small amount towards the balance, but you are paying mostly interest, where as other credit cards help you pay down the balance with the minimum payment as well as paying interest.

What is the point in lowering the interest? The cheaper rate does help.  It means that you are going to save on the amount of interest you pay in a year.  In other words if the interest rate is lower, but the payment remains the same you are paying more towards the balance of the card.  This is good news for you.

Will the credit crunch affect balance transfers?  The only thing to worry about with the balance transfers is that the credit crunch can make it more difficult to get a great deal.  The lenders are going to be a little more sensible in how they dole out credit.  In the past they gave credit to a lot of individuals regardless of the risks.  Today they have to make sure the risk is lower in order to recoup losses.  This means it can take you a while to find a card that may not reject you or offer too low a balance in order to make the balance transfer successful.

Is there a limit to how many balance transfers you can do?  Yes and no.  Depending on the card you have up to a certain amount of time to get the balance transfers completed, so there is a limit to the deal, but you can continue to switch from card to card, or do a balance transfer on the same card.  It all depends on how successful you want to be with the balance transfer.  Remember switching cards affects your credit score.  Also keep in mind that if you do a balance transfer after the end date of the deal you are going to be paying interest.

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

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