Facts you should know about balance transfer credit cards

Over recent years transferring your credit card balances onto a lower interest or interest free credit card has become a popular process, and the introduction of balance transfer credit cards has made it easier for credit card customers to enjoy saving considerable sums of money on their credit card balances in terms of interest.

The interest rates charged on credit cards can be very high, and this means that you could end up paying a fortune on your credit card balance. However, if you use a balance transfer credit card you could save a lot of money in interest, making it more affordable to repay your credit card debt.

You will find that balance transfer credit cards are available from a wide range of lenders, and this means that you can enjoy plenty of choice as well as an increased chance of finding the perfect card for your needs.

Balance transfer cards can really help you to reduce the amount of interest that you will pay on your credit card debt, but you should remember that there may be other costs involved, so you need to way of the costs and savings in order to determine whether a balance transfer is the right choice for you. Here are some frequently asked questions relating to balance transfers:

Why do people transfer their balances?

Many people have a number of credit card debts on high interest credit cards, and much of the repayment that they make each month gets swallowed up in interest.

By transferring these high interest balances onto a balance transfer card these consumers can enjoy paying a far lower rate of interest on the outstanding balance, or in some cases may be able to get away with paying no interest at all depending on the type of balance transfer card used.

Who are balance transfer cards for?

Balance transfer cards will suit anyone with one or more credit cards with outstanding balances on which high rates of interest are charged. Of course, balance transfer cards will not benefit anyone that repays their balance in full each month, as if you do this you won’t be charged interest anyway.

However, if you like to spread your repayments then you could benefit from the savings that can be made on these cards. Those with poor credit may find it impossible to get a balance transfer card, as many bad credit customers would only be eligible to take out a credit card designed for those with damaged credit, which usually charge high rates of interest anyway to cover the increased risk to the lender.

Can I transfer more than one balance onto a balance transfer card?

Yes, you can transfer as many existing credit card balances as you like onto your new balance transfer card providing you do not exceed the credit limit on your new card.

How do the balances get transferred?

The easiest way to transfer the balances is to provide your new card provider with your other credit card account details, and the new provider will then get these balanced paid off. Your debt will then be transferred to the new balance transfer card.

What is a 0% balance transfer card?

A 0% balance transfer card is a credit card that offers a specified period of interest free credit on transferred balances, such as nine or twelve months. The idea is that you repay your transferred balances within this specified period in order to avoid paying any interest.

What is a life of balance transfer card?

A life of balance transfer card is slightly different in that it does not offer interest free credit. What is does offer, however, is a very low rate of interest on transferred balances, with no deadline by which the transferred balances have to be repaid providing the minimum repayment is met each month.

So, as long as you are making the minimum payment you can take as long as you want to repay the transferred balances whilst still benefiting from the low interest rate.

What is a balance transfer fee?

A balance transfer fee is a fee usually charged by 0% balance transfer credit cards, and is usually a percentage of the total amount being transferred. The percentage charged by most providers is about 2.5% to 3% of the transferred balance, usually with minimum and maximum limits.

Can I make purchases on a balance transfer credit card?

You can make purchases on a balance transfer credit card, and most credit card providers would be happy to see you do this, as it means more money for them. This is because any balance accrued from making purchases on the card will get trapped behind the transferred balance, which is either very low interest or interest free.

Your monthly repayments will then be applied to your transferred balance, which means that your purchase balance festers and accrues interest at the lender’s costly standard variable rate. You should therefore avoid using your balance transfer card to make purchases or cash transactions.