Balance Transfer Credit Card

Balance transfer credit card offers seem to be  money in the bank, but are balance transfer credit cards as good as they sound?

How many times have you maxed out one credit card, then lured in by the prospect of applying for another one? The no annual fees, low interest re transfer credit card bonuses offered by that new card can often be irresistible to many consumers. But beware – there is always a catch. 

Most credit card companies, being aware of the typical spending habits of the American public have realized that more often than not, people max out their credit cards. Which is why the balance transfer credit card has become so popular in recent years.

A balance transfer credit card is one in which, when you sign up, you transfer the balance from your old high interest rate credit card to the new lower interest rate credit card.  And why do the banks give out such apparently self-defeating balance transfer credit cards? The answer is quite evident. There is far too much competition in the  credit card market, credit card companies have to bend over backwards to win over consumers to lend to.  With a balance transfer credit card, the new bank can not only gain your loyalty, but also make a profit on  future spending you do on the new balance transfer credit card.

Wise shoppers use balance transfer credit cards to their advantage when the interest rate on their existing credit card balances are too high. But remember that the balance transfer credit card is more of a consolidation tool for credit card debt than a license to build more debt.

 Here are a couple of tips to help you stay out of credit card debt with your new balance transfer credit card.  

Most importantly is the interest rate.  The annual percentage rate must be substantially lower than your existing credit card APR in order to make transferring your balances onto the new card worthwhile. If the interest rates are higher, then you may find yourself  building bad credit card debt.

Secondly, check to see if your balance transfer credit card is time bound. Many times the low APR on the new credit card comes with a specified time limit. You need to know how long the introductory offer lasts, and more importantly, what the regular rate of interest is when it does expire. Is the regular rate lower than your current credit cards Interest rate? If not, then keep the lower rates you already have.  And, does the regular rate of interest apply to new purchases or does the low interest rate apply? Finally, it would also be smart to check if the balance transfer credit card has any hidden charges.  Doing so will not only ensure that you actually get the best credit card deal but will also prevent costly surprises.