Balance transfer credit cards became popular about a decade or so ago. The idea is to take the balances on your other credit cards and transfer the debt to a low interest rate card. This simple action can actually save you hundreds of dollars in interest but there are some things you should be aware of.
Typically when you transfer all your balances over to a low interest rate card the interest rate on the new card may not stay low. In cases of low interest rate cards the interest rate may rise after a specified period of time.
The rate may go up in increments over time so time is of the essence if you are going to get the most out of the deal. What you are doing when you transfer your balances over is you are paying off one credit card with another which is perfectly fine because it gives you a chance to have a paid off card on your credit report and you will save on interest payments.
Of course there are other benefits to transferring your balances. It is easier to keep up with one monthly payment than it is to keep up with more than one or five. You just have to make one payment each month AND you do not have to keep records of several different open accounts and risk forgetting a payment.
Balance Transfer Fees
Nothing in life is free not even transferring balances from one credit card to another. In most cases the fee is a percentage of the amount of the balance transferred over. The percentage can vary greatly because there is no longer a cap in place that governs how much a credit card company can charge you.
Pay Attention To the Rules
Some credit cards only offer the zero balance interest rate on balance transfers and charge typical interest rates on purchases. Being diligent about reading the rules will make sure that you are not duped into spending with the new card and back to paying out for interest.
Good Credit Only- Most Of The Time
These little gems are typically only available to people with good to excellent credit. The recession changed how things were done in the credit card world and the 0% interest transfer cards took a big hit in the who can qualify department. They are a good option if you can get one.
*See other types of popular credit cards here.