Change Your View on Balance Transfers
You've had the gain and when you look at your credit card balance you feel the pain. OK you have to repay your debts but a balance transfer can make big inroads into that pain and keep the price of the gains as close as possible to the manufacturer's recommended price. To the credit card holder the balance is a liability but to the provider it is an asset. Lenders that attract balance transfers make a stream of income and profit as long as you continue to pay the monthly amounts.
From the cardholder point of view a balance transfer to a zero percent card is an opportunity to pay off the debt in 6, 9 or even life but not many of them do this in reality. Most cardholders use the balance transfer card for ongoing purchases so when they do the balance transfer they need to compare all the available balance transfer deals and look for 2 key things in the deal.
- What is the typical rate of interest outside of the balance transfer term? When comparing credit cards clearly the cardholder should select the lowest rate available.
- Does the zero interest rate apply to both the balance transfer and the current spending? And does it apply for the same time periods? Some cards may offer the low rate of interest for 6 months on spending while it is 9 for the balance transfer. Unless the cardholder is very savvy this situation can lead to debt problems down the line.
Balance transfers on credit cards of this kind are most appropriate for people who do not intend or are unable to repay their debts in full but at the same time do not want to be a serial balance 'transferer'.
The zero interest balance transfer deals are very attractive when you are faced with a large credit card balance that you are unlikely to repay in the short term. You are going to pay some interest the only question is how much. But there are other comparisons too. There are credit card providers that offer permanently relatively low interest rates. These should definitely be part of your comparison process if you are aiming to pay off your current credit card balance or store card spending but know it will take longer than the zero rate balance transfer time.
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