Transfer Your Balance and See The Savings

Credit cards provide an incredibly convenient and flexible way for us to borrow money; unfortunately credit card providers are well aware of this and charge us greatly for the privilege.

When you consider that the interest rates charged on most credit cards are 2 to 3 times that which you'd expect to pay on a loan, together with the fact that the longer you leave an outstanding card balance, the more you end up paying (because of compounding interest - basically you end up paying interest on any interest accrued as well as on the outstanding each month) it becomes obvious why it's so difficult to completely repay existing credit card balances and to stay out of the debt spiral.

Thankfully credit card companies are so desperate to draw your custom (and interest repayments!!) away from their competitors that they have come up with an inventive way of enticing you to switch - balance transfers.

In the world of finance loyalty rarely pays so you should make the most of these balance transfer incentives and switch to the credit card company that provides you with the best leg up onto the path towards becoming debt free.

What are balance transfers?

Balance transfers enable you to move existing credit card balances from one card to another, essentially paying off the outstanding on the old card with the credit available on the new card.

While technically you could transfer your balances to a card that charges almost the same rate of interest as you are currently paying, this would be an entirely pointless exercise so to make this worthwhile you should look at the different offers available and consider which is going to best enable you to clear your debts. Many credit cards now offer interest free, 0% balance transfer offers for a number of months as a means of enticing new customers, however low rate life of balance transfer offers are also available.

Why should I transfer my balances?

By transferring your balance to a credit card with a 0% balance transfer offer you will effectively be granted an interest free period during which all of the repayments that you make will go towards the outstanding balance, giving you the opportunity to clear as much as you possibly can.

It goes without saying that you should go for the longest balance transfer offer possible and try to pay off your cards during this time.

If you are unable to clear your credit card balance completely during the interest free period you really have 2 options. You can either move the remaining balance to another card offering an interest free period on balance transfers and continue repaying and moving until the debt is completely cleared. Alternatively you could switch to a credit card that offers a low rate on balance transfers for the life of your balance.

Although 0% is preferable over paying interest, if you have a large balance that you will be unable to pay back within the 12 months or so of the balance transfer offer the latter option could be worth considering as it will provide you with a consistently low rate.

Because more and more people are choosing to take advantage of balance transfer offers and switching cards when they expire, the vast majority of credit card companies have introduced a handling fee which tends to be a percentage of the amount transferred. So, if you are transferring a large amount you may end up paying a substantial cost in handling fees each time you switch as unfortunately fee free balance transfers seem to be a thing of the past.