The Benefits of Credit Card Balance Transfers
When you might want to consider credit card balance transfers.
You see the offers all of the time -- credit card balance transfers at great interest rates. If you’re looking for ways to lower monthly expenses while freeing up more cash, these offers can be pretty intriguing. So when should you seriously consider balance transfers? Let’s take a look at the benefits that balance transfers have to offer.
Lower Interest Rates
One of the main benefits of credit card balance transfers is the lower interest rates offered by some of the credit card issuers. By lowering your interest rate, you can lower your minimum monthly payment and you can pay your balances off sooner.
However, if you’re doing a balance transfer solely for the lower interest rate, make sure that the rate isn’t just a honeymoon rate. Extremely low introductory rates, also known as honeymoon rates, can increase drastically after the introductory period is up, leaving you off right where you started.
On the other hand, if you can pay off the credit card balance transfer before the introductory rate expires, the balance transfer may be worth it, even with a honeymoon rate. Especially if the balance-transfer credit cards you are considering are at zero percent interest.
Consolidating Credit Card Debt
If you have a number of credit cards with remaining balances, you may want to consider balance transfers to consolidate your credit card debt. By consolidating your debt you can lower your minimum monthly payment requirements and you can get your balances paid off more quickly.
Improving Your Credit Report
Having multiple credit cards with balances on them looks worse on your credit report than having a single credit card that carries a balance. Balance transfers can help improve your credit by combining all of your outstanding credit card debt into one credit card, leaving you without a balance on the cards you’re transferring from.
The trick is to stop using the cards you are transferring the balance from to avoid accruing a balance again. This would negate the benefits that the balance transfers offer you.