Doing a Credit Card Balance Transfer

What is the credit card balance transfer and when you should transfer Your Credit Card Balance ex-paragraph the ideal behind transferring the balance from one credit card to another is to save money mostly on interest and financial charges. A credit card balance transfer is when you transfer the balance of one credit card to another credit card that is typically offering a lower rate of interest.

Credit card companies that make special offers to take on the balance of another credit card usually offer a promotional and a lower rate of interest. By transferring your balance from a higher interest rate credit card to a lower rate credit card will help you save money on interest. You should make note of the introductory rate of interest and check the duration during which it is going to be active. There can also be certain clauses and conditions to qualify for the lower introductory rate. Pay attention to these clauses and include them in your decision to make the balance transfer.

You should not transfer a credit card balance in order to avoid payment. A credit card balance transfer works the best when you pay off the entire balance during the period when the introductory low rate of interest is active. A simple calculation will tell you how much you will need to put away every month in order to repay this balance. Sometimes there is also a balance transfer fee and other finance charges associated with a balance transfer. Figure this factor in your calculation of how much money you will save by transferring your balance to a balance transfer credit card.

While a credit card balance transfer can help you save money in the interest, it can impact your credit score negatively as well. The credit score considers the credit limit utilization along with other factors. When you transfer of balance to a credit card is possible that you run that credit card high on its credit limit therefore increasing the credit utilization. This is especially true if the credit card you are transferring the balance to is one of the credit card is that you already use and one that has an existing balance on it. Before doing the balance transfer check how much your credit score might get affected by this transaction. Saving a few dollars might not be worth damaging your credit score in the long run.

Before you forget about your old credit card after you have done the balance transfer cheque that you receive a billing statement with a zero balance. Only after you are completely sure that the balance on your old credit card is zero, should you think about cancelling it. If there has been some mistake during the balance transfer or you have made additional charges to the credit card afterwards you may find that there is a pending payment still to be made on the credit card. Ignoring the credit card after the balance transfer could result in you missing a payment, being levied by the late fee and even getting reported to the credit bureaus for a late payment.

Earlier whenever there was an existing balance on the credit card that you had transferred the balance on, any payments that you made on the credit card that was above the minimum would go towards paying off the balance with the lowest rate of interest. This would continue until that balance had been completely paid off before moving on to the balance with the next higher rate of interest.

As per the new credit card regulation laws that have gone into effect on 22nd of February 2010 the credit card companies will be required to remit the above minimum payments towards the balance with a higher interest rate.

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