Understanding Balance Transfers

Answer 1

One of the most important things that you can use to further your financial future is a balance transfer. Though most people think that almost all offerings from credit card companies are geared toward favoring the creditor, this isn't exactly true. As more and more competition has popped up in today's credit world, the card providers have to do things to bring in new customers. This is where balance transfers come into play. The card providers offer low or non-existent introductory rates for people who want to transfer their balances. So how does this work and why should people look to balance transfers?

What are balance transfers?

Balance transfers occur when you take an advance from your current credit card to pay off some other credit card or creditor. Some credit card companies send a check directly to you and let you pay off the other creditor. Other credit card providers will ask for the address and they will send a check to the other creditor on your behalf. This is a really nice thing for people who want to knock out their old balances without having to waste a lot of time. You then have a balance on your current card and you don't have to worry about the other creditors.

Balance transfer deals

One of the things to know about balance transfers is that you don't have to make them at a high interest rate. Credit card providers often provide 0% APR on balance transfers for a period of six months to one year. For those who don't provide the non-existent rate, the balance transfer rate is often quite reduced as compared to the normal APR. For instance, you might pay 3.9% on balance transfers instead of the normal 12.9% APR. This makes balance transfers a good idea and can provide tons of savings for people who are worried about that sort of thing. Ultimately you can knock out your old, high interest debt by taking on different debt at a low rate.

Responsibly using balance transfers

Know that people need to understand how to use balance transfers in order to have success with them. They can certainly provide a means of getting out of debt and saving money over time. They are best used to directly pay off that old debt. Some people use balance transfers for personal purposes, but this isn't the best way to make use of the money. When you use balance transfers to pay off old, biting debt that continues to accrue at high interest rates, you help out your credit and you strengthen your financial future. Balance transfers play a huge, important role in the process and you can smartly use them to your advantage.