Credit Card Balance TransfersCredit Card Balance Transfers

Competition among credit card companies is fierce. Each company has to devise new ways to attract potential credit card customers, and this is the reason you're flooded with credit card offers by email, postal mail, and even through television commercials, retail stores, and magazine advertisements. One credit card company will claim to offer the lowest interest rate for the longest period of time, while another offers cash back rewards on the purchases you make using their card. All of the fabulous offers made by credit cards are designed to help the credit card companies get more business- and not necessarily to help the consumer!

The competition among credit card companies does have its advantages to the average consumer, however! The average person carries a credit card debt of ?1,140 spread out on a number of different credit cards, each with their own interest rates.

The competition between credit card companies has caused many to offer 0% balance transfer rates, hoping to take over your existing debt. Credit card balance transfers are when you take the outstanding balance from one credit card and move it to another credit card in order to save money on the interest you pay each month on your outstanding balance. Credit card companies often offer 0% interest on balance transfers as an introductory offer, so before you apply for a new card to use to transfer your old balances onto- try to find the card with a 0% interest rate for the longest length of time you can qualify for!

There are some instances when transferring a balance to a new card isn't your wisest choice.

If you apply for a credit card that offers a 0% introductory rate on balance transfers, and they give you a balance transfer limit that is less than the amount of money you need to transfer, it may not be in your best interest to take that card.

For example, lets assume you have an outstanding balance on your credit card of ?2500, and you're currently paying an interest rate of 12.9%. Assume also that you can only make your minimum payment each month, which is about ?55. You decide to find a credit card to transfer this balance to, hoping to pay less interest so that more of your monthly payment is used to reduce your amount owed rather than just pay on the interest each month, and after doing some research, you find a terrific credit card offer that has a 9 month, 0% interest rate on all bance transfers! You apply, and will probably get accepted- but what happens when you find out your balance transfers are limited to ?1000? Now you've got to decide whether or not it will be financially beneficial for you to transfer ?1000 to the 0% credit card, and keep paying on the ?1500 you still owe on the original card of 12.9% interest, or to cancel the new card despite the wonderful balance transfer rate, and keep just one card open! In this case, you might decide to keep the card you currently have, making sure to pay your monthly payment on time every month to improve your credit history.

After a few months, you can start looking for a credit card with a 0% balance transfer offer again, and see if you are given a card with a higher balance that can accept your current debt.

If you have a good credit history, your chances of receiving a new credit card with the 0% balance transfer that has enough room to transfer your balance is better. This is the ideal situation, as now you have a single credit card that you are not paying any interest on. Every pound you send is reducing your total amount owed, and you will be able to pay off your debt faster on a credit card with a 0% balance transfer offer.

The best way to pay off this debt is to take the total amount of money you owe divided by the number of months you have the 0% interest rate. This is the amount you should pay every month in order to pay off your balance without paying interest. If that amount is more than you are able to pay on a monthly basis, pay what you can (as long as it is at least the minimum amount) and just be sure to take into consideration what will happen once your introductory period is over, and if the interest rate is higher than what you find acceptable, simply look for the next credit card company offering a 0% balance transfer rate!

by Phil Edwards
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Phil Edwards is a Business analyst in the city of London, freelance writer for several finance magazines and websites and co-owner of Credit Cards Compared, UK Loans and Home DIY

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