Balance transfers may seem like the answer to your credit card debt problems, but many customers don’t take the time to consider all of the details of the balance transfer, and are therefore unable to take full advantage of the balance transfer and the reduced interest that is available.
First, it is important for the customer to understand the basics of the balance transfer. What is a balance transfer? A balance transfer allows the customer to transfer the balance of the credit card debt from a high interest credit card, to a credit card that comes with zero interest for an introductory time period. Throughout this time, the entire payment that is made to the credit card debt will be applied to the principal of the credit card debt, as opposed to being paid towards the interest that is being charged to the customer for the credit card.
What’s the problem with a balance transfer? In order for the customer to determine whether a balance transfer is going to suit their needs, they need to consider the stipulations that come with the balance transfer. Most often, the balance transfer allows the customer to take advantage of zero interest credit cards for up to eighteen months. However, once the introductory period has been completed, which often lasts between six to eighteen months, the customer will be required to pay the traditional interest rate that is associated with the credit card. Depending on the credit card company and the stipulations, this balance transfer might even be higher than the original card.
Before taking advantage of a balance transfer, the customer should consider if they are going to be able to repay the balance transfer before the introductory period has expired. Paying the credit card in full by creating a repayment plan that works with the budget can ensure that the consumer is not going to be stuck with the high interest rates that are associated with the balance transfer, and can therefore cost more in interest once the debt has been transferred to the new credit card account.
How can the customer determine if the balance transfer is the best option for their credit card debt solutions? Customers can determine if the balance transfer is the best solution to the problem if they are able to repay the credit card debt completely within the introductory period of the balance transfer, where the customer is going to be able to take advantage of the balance transfer. This way, they can avoid paying interest on the debt and ensure that the entire debt repayments are going to be made to the principal of the debt, rather than the interest.
Speaking with a debt consolidator, the financial company and even the credit card company to find the terms of the zero interest balance transfer can be an effective way to determine whether the balance transfer is the best option to suit their needs.