Playing the Balance Transfer Game

Can't refuse that 0% credit card offer? Before you bite, be informed of the benefits and dangers of balance transfers

Credit card balance transfers seem like a great opportunity. In fact, the way the lenders present these loans, they seem like they are the best thing that has happened in the lending industry in a long time. The problem with this is, though, that credit card transfers can only be a good thing if you take the time to search for them, secure them correctly and use them wisely. There are some pitfalls you should avoid and some very important pieces of information that you need to know.

What Is a Balance Transfer?

A balance transfer is a means of transferring money from one credit account to another credit account. By doing this, you will be able to secure the benefits of the better card. Generally, you would do this if your interest rate is lower on the transferred credit card. Low rate balance transfers are the most common reason that people will transfer funds from one lender to the next.

Benefits And Problems With Balance Transfers

There are some benefits to the balance transfer, and of course there are also some downfalls. You should consider both so that you can make the right decision and avoid a potential problem in the future.

If you find a 0 percent balance transfer offer, it may seem like a great thing. If they are offering you a 0% APR on balance transfers, carefully look at the deal. For example, does 0% only last a limited amount of time, like 6 months? If so, when it expires, what will you be charged for the APR? If it's high, carefully consider the offer, because it may not be worth it.
You should consider the credit card balance transfer if you determine that they are offering a low rate balance transfer with no fees. This can be a great way to cut down on the amount of money that you owe in the long run. Again, make sure you know if the low rate balance transfer has a limited time and what the rate will be down the road.
The balance transfer best deal out there is the one that will offer you the low rate balance transfer for the longest period of time, with few to no fees and will have a fixed rate at the end of the term that is low. The combination of these factors make it a better choice for you in the long run.
Finally, if you use a credit card balance transfer, the biggest mistake you can make with it is paying off your other credit cards with it only to use them again and fill them up. If you use a balance transfer to help you to get out of debt and save yourself some money, consider getting rid of the high APR credit cards. If you use this new line of credit, fill it up then go and use the credit cards you paid off and fill their balances, you could be in a lot of trouble. Once you transfer the balance to a new account, close the old one so you are not tempted to use it.

One Final Drawback

If you have a history of transferring balances every six months or so, your credit report will reflect all these accounts and it will be considered a negative for future lenders. Your credit score will go down and the credit bureaus will give the reason something to the effect of "too many revolving credit accounts recently opened."

Final Thoughts

I played this balance transfer game a lot when I was in trouble financially. While it does make sense to take your high interest rate credit cards and transfer their balances to cards with lower rates (hopefully a 0% offer), it's usually a sign that you can't handle your current debt load. You need to check out your options to see what might be right for you to lower your debt load.

Debt settlement can quickly and greatly reduce your debt load. People who have used debt settlement have often been able to secure mortgages and other loans at a much better rate than without it. Consider hiring a debt settlement company to take care of the details and get you on your way to being debt free and not having to transfer balances frequently.

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