Since more and more people practiced balance transfers taking advantage of credit card companies’ promotions, the credit card companies started making it harder to benefit from balance transfers and try to discourage continuous transfers of balances to retain the clients. Yet, it is still possible to take advantage of credit card 0% promotional periods and balance transfers to reduce your outstanding credit card debt.

Here are some tips and tricks you should follow to make the most out of balance transfers. But first, let us review the concept of balance transfer for those who are not sure how it works. This is essential for you to understand why balance transfer practices are not an easy task and should not be undertaken if you can not be alert enough to act when the time is right.

Balance Transfer

Transferring the balance from a credit card to another makes sense if the new credit card has a lower interest rate than the previous credit card or if it offers a promotional period with a reduced interest rate. There are some credit card companies that offer a three to six months promotional period within which the transferred balance generates absolutely no interest.

People can benefit from this by transferring credit card balances from old accounts to the new one and trying to pay off the debt in full before the period ends thus avoiding financing charges and interests. As explained above some people used to transfer the balance again to a new account before the promotional period ended thus keeping debt that generated no interests. However, this practice is now limited due to credit card companies restrictions and fees.

Balance Transfer Interest Only

Credit card companies provide the 0% rate for balance transfer promotion but still charge the regular rate for the balance generated by new purchases and since the balance that is paid first is the one transferred from the previous card, the new balance will generate interests nevertheless. Therefore, it is advisable not to use the credit card you transferred the balance to for purchases.

If you have a credit card with a 0% APR promotional period for purchases, you should use that card instead for new balances or else, resort to other less expensive financial products. Otherwise, while you think you are getting a great deal by reducing your debt and paying no interests on it, you will actually be building a parallel balance that does generate interests at the same or greater pace.

Avoid Fees When Switching

The best way to go is to try and repay the whole debt during the promotional period, however, if you need to switch cards again, make sure to do it on time so no interests are incurred and select a credit card that does not charge a fee for balance transfers. Otherwise, the fees can add up to more than what you would have paid on interests.

Sometimes Switching Is Not The Best Action

There are some credit card companies that let you transfer additional balances at a promotional rate too. Thus, if you manage to get one of these cards, it is a good idea to keep them as they can provide many benefits in the long run. Usually the rates charged after the promotional period has ended are not outrageously high and thus, it is best if you stick with the same company thus building a good credit history on that open line of credit.

Author Bio: Kate Ross has a Master in Finance and has been a financial consultant for years. She specializes in Guaranteed Personal Loans and also in helping people to get approved for Guaranteed Loans for Bad Credit, unsecured loans, poor credit loans, no credit check loans, student loans among many other financial products. Visit her at http://www.speedybadcreditloans.com

Category: Finances
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