What is a credit card balance transfer?

When you are in debt applying for a credit card would be a foolish idea. However there could be one exceptional scenario where in it could be a good idea where credit card balance transfer is involved. This facility can be availed by you if you have a mail box and a social security number.

The business of credit cards is booming these days with the companies raking in huge profits with the finance charges. The average annual percentage rate on most of the cards is 16%. This kind of interest makes it difficult to pay down the card and the interest keeps adding. The hottest stocks are also pressed to grow for 16% in the year. However since the companies are very anxious for your business the balance transfer was invented.

In a bid to lure customers towards themselves the companies offer to transfer the balance from your credit card for free. Once the money is now owed to the new company they provide you with a grace period where the money charged on the transferred balance is far less. At times the rate of interest can be as less as 0, 1, 2% etc. This introductory rate lasts for about 6 months from the date of the balance transfer.

For someone who is smart enough to adopt this scheme it could be a very good method of reducing credit card debt. This way the person can pay the balance on the credit card without incurring interest charges. This way a new account can be opened where balance transfer is available and money could be saved.

However always remember that if you are going in for balance transfer then immediately close your old account. This is because having more than two credit card accounts can be damaging to your credit score. Making a balance transfer is a good way of saving money but you need to be diligent. This is because there could be a fine print with hidden charges. Some banks also charge a transfer fee that could be actually a percentage of the balance transferred.

Be sure that the bank doesn’t let this fee go above say 70 dollars or so. Also make sure that there is no high joining fee etc that is charged by the bank. Don’t let the credit card companies take an upper hand while getting your business since they desire it so desperately.