Balance Transfer Credit Card Offers

Low Interest Rate Credit Cards/ Balance Transfers

A balance transfer credit card refers to the process whereby you use a new credit card to pay off/transfer over an existing credit card or store card debt.

Put simply, if you have one or more high interest credit cards with an outstanding debt balance, by sourcing a new credit card with a low interest rate or 0 balance transfer, you can move the debt(s) over.

Apart from bringing all your credit card debts under one roof, the new low interest rate or 0 balance transfer credit card offer will save you significant amounts in interest payments, during the low/0% balance transfer period. This period is typically 3-6 months, with some credit card companies offering even 0 balance transfer on credit cards of up to 12 months.

An important feature of balance transfer credit cards is that when used effectively, they will help you to clear credit card credit debt quicker, rather than merely servicing the interest only element of your repayments.

Whether you manage to secure a 3-6 or 12 months 0 balance transfer on credit card deal or a low rate interest card, the important thing to remember here is, that the lower the balance transfer offer, (a 0% balance transfer combined with a fee-free credit card is best), the bigger the proportion of your repayments that will go toward reducing your balance.

Under no circumstances should you ever make purchases on a 0% balance transfer credit card or any other low interest rate cards, after you have transferred the balance. If you do, you will incur a high rate of interest and/or charges that will at the very least wipe out any gains you make on the low rate or 0 interest balance transfer. This is just one of the various ways a credit card company will profit from your spending habits.

How Credit Card Companies Benefit From 0 Balance Transfer Credit Card Deals?

So, what's in it for the credit card companies? They want your business and especially, if you happen to have a healthy credit history of making your credit card payments on time. What better way to lure you than with attractive credit card 0 balance transfer offers.

Credit card companies rely on 0% credit card balance transfer offers, plus rewards and cashback incentives to entice you into taking up one of their credit card credit products. However, as credit card offers go, 0% balance transfer credit cards will carry a much higher rate of interest if you make purchases on the card (any where from 15% upwards).

New purchases on 0% credit card balance transfers will therefore prove more costly to you because the credit card company will nearly always apply your repayments to clearing off the cheaper 0 interest balance transfer credit card debt first. This leaves any new purchases debt you acquire, accruing a higher rate of interest (possibly over the long period of time it takes you to clear the debt).

And note, you will not be able to clear this more expensive portion of your debt until the cheaper 0 balance transfer credit card credit debt has been paid.

0 Balance Transfers on credit cards - Some Facts

Prioritising and discharging the cheaper 0% card balance transfer over the more expensive 'new purchases debts', is very profitable for the credit card company and is just one of the various ways they make their money from you.

In addition to the above, credit card companies bank on your defaulting in some way in order to profit from you. For example, late payment fees, higher interest charges and especially where rewards and incentives schemes/ credit card offers are involved. Be aware that in general, the cheaper and more enticing the product or credit card with 0 balance transfer, the more it will cost you if you do not use it wisely.

Best Credit Card Balance Transfer

0 balance transfers on credit cards are ideal if you have an existing credit card credit debt or other store cards with outstanding balances. You should aim to secure the very best 0 balance transfer credit card deal that offer you a long balance transfer period of between 3-6-12 months or so. If you can get a fee-free credit card, all the better.

If you intend to continue spending on credit cards, it is better to source a separate credit card on which to do so. Some credit card suppliers do in fact offer 0% interest rate on purchases for between 3-6 months or even more. However, you will need to ensure you're in a position to clear the balance in full before the 0% interest rate period is up, or get charged at a very high rate.

Alternatively, you could opt for a low interest rate credit card. Do your homework and you will most definately find that there are even a few credit cards that will offer you a cheap rate deal, enabling you to do a balance transfer and make purchases all at the same rate of interest.

Although you are more likely to secure this combination deal on cheap rate credit cards rather than on 0 balance transfer credit cards, the two above approaches will nevertheless make repayments on these types of credit card accounts cheaper.

The content on this site is purely for information purposes only and is not intended to replace your seeking professional financial advice.

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