Balance transfers allow borrowers
to pay off credit cards, auto loans, or other credit lines by moving their existing
debt to a newly opened credit card account - ideally, one with better terms and
a lower interest rate than their existing account. Balance transfers can be a
great refinancing or debt consolidation tool if you have good credit and your
debt is still manageable.
Balance transfers are usually available when you
apply for a credit card and are often included separately on your monthly statement. With fierce competition in the credit industry, banks and other
lenders will compete for your business - so be sure to check online where you can find some of the best offers available. >>>
Types
of Balance Transfers There
are several types of rate structures for balance transfers. You can choose from
three types of offers: purchase, teaser and fixed rate. - Purchase
Rate Offers: Your transferred balance will be subject to the same interest
rate that applies to the purchases you make.
- Teaser
Rate Offers: A low interest rate applies to the transferred balance for a
limited time. The rate will return to the original purchase rate when the 'intro
period' ends - typically from 6 to 15 months. The best teaser rate offers provide
0% interest for 12 months or more.
- Fixed
Rate for Life Offers: A low interest rate applies until the transferred balance
is paid in full, as long as the account is paid on time. Usually the rate's a
bit higher than a teaser offer, but you will still save a significant amount over
the standard credit card agreement.
Balance
Transfer Fees & Interest Rates Most
credit card balance transfers are subject to a transaction fee that varies from
1-5% of the transfer amount. Typically, credit card companies charge about 3%
of the transfer, with a limit of $50-$75. Also,
be aware that 'default clauses' allow credit card companies to raise your interest
rate if you don't abide by the terms of your credit card agreement. Be wary of
broad default clauses that give the credit card company the option of raising
your rate at their discretion. It's common for them to raise your rate if you
make a late payment more than twice in six months. But steer clear of cards that
can raise your rate if they determine your account 'carries risk'. More
About Balance Transfers A balance transfer
can take several weeks to post. So it's imperative that you continue to pay the
minimum payment on the credit card you're transferring from or you may end up
paying fees for a missed payment if the transfer is posted after your payment
due date. Creditors are banking on consumer's
who fail to responsibly pay their credit card bill on time due to the increase
in rates and fees when you default on your account. But if you're a wise consumer,
and stay on top of your monthly payments, you can win BIG in the balance transfer
game. See a complete list of balance
transfer & 0% interest credit cards >
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