What Do I Need to Know About Balance Transfer Credit Cards?

Posted on 15. Oct, 2012 by in Wealth Essentials

Balance transfer

This is a guest post

Most of us are being more careful than ever with our money and with continued concern about the international economy and the UK housing market it seems that this is unlikely to change any time soon. If this sounds like you, then there’s every chance you may want to get better control of your existing debts – which is where a balance transfer credit card can come in handy.

However, while many of us will have heard them mentioned, there will be plenty of people who are still wondering what they are and how they might help with their financial reorganisation plans. Here is a quick guide to balance transfers and how they can prove useful to those looking to get savvy with their money. 

What is a balance transfer?

If you owe money elsewhere, say for example on usually expensive store cards or older credit card accounts, there is a chance you are paying more in interest than you need to be. If you can find a credit card that offers you a better deal, you’ll probably want to move all of these existing amounts over and take advantage of the more competitive rate, which is known as a balance transfer. Balance transfer credit cards will usually allow you to do this with a 0 per cent rate of interest, though there may be other fees that apply. You may also need to check the duration of this offer if you want to make sure you can make the most of it.

How do I go about setting this up?

Well, the first thing you should do is get down on paper all of your outgoings and what you are repaying in interest each month. Then you need to head to the web, where you’ll be able to compare credit cards that offer 0 per cent balance transfers and make an application. If you are successful, you’ll be able to start moving these balances over pretty much straight away – either over the phone or by using your online account. MBNA is one company that allows you to do all of this online, but as all providers will be different, fees, introductory periods and other details are things to look out for.

What else do I need to know?

Like any financial product, you’ll be bound to certain terms and conditions. While the amount you can transfer will vary depending on what you owe, it’s a good idea to set up an agreed credit limit as soon as possible and stick to it so you don’t simply incur more debt. Some banks will charge annual fees as well as fees for the transfer, so do your homework in advance to make sure this isn’t going to be too costly.

Image by Fosforix

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4 Responses to “What Do I Need to Know About Balance Transfer Credit Cards?”

  1. A balance transfer on a credit card can be a dangerous tool people use to perpetuate a debt death spiral.

    However, I think a general rule of thumb should be that if you transfer debt for reasons like taking advantage of a lower interest rate you should cut up the old card.

    Thats my opinion

    Reply to this comment
    • Money Cactus

      19. Oct, 2012

      Couldn’t agree more Jon. There is no reason to have multiple cards, particularly if you can’t manage your debt in the first place. This sort of arrangement should be used to help get yourself out of debt, not further into it.

      Reply to this comment
      • What is your opinion of keeping a Card you have had for a long time simply for the credit score benefit? I am asking because I have a $15/year card that I don’t use more than once to twice per year but I keep because of the supposed credit score benefit.

        Reply to this comment
        • Money Cactus

          22. Oct, 2012

          Depending on the limit your card has, you could do more harm than good keeping it. Even if you have ninja like self control, the limit can count against you if you apply for a loan or other form of credit. Being refused on an application will often impact far more negatively than any positive of keeping the card to bolster your score.

          Reply to this comment

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