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Credit Cards > Articles > Balance Transfer Benefits

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Balance Transfer Benefits

Anyone who has one or more credit cards reaching the upper spending limit may think that opening yet another credit card account would be a bad thing to do. If you were considering this as just another way to obtain more credit, then yes it might be a terrible idea, but on the other hand, if used correctly, it could be a major boon. Confused? Then read on.

If you have a credit card, and are currently finding the monthly repayments painful, it could pay you to search about for better credit card offers, with a lower overall interest rate. If you are successful in find the right kind if credit card, you will then be able to take advantage of the balance transfer facility. A balance transfer is a term used to describe moving the money you owe on one credit card to a different credit card. If you move this debt from a card with a higher interest rate than the card you are moving it too, you will have lower monthly repayments. A low interest credit card may have an interest rate as much as 50% lower than the average Australian credit card rate which is now over 20% following recent rate rises.

The benefits do not stop here however. Most major card operators will usually have some form of special offer for balance transfers. It may be that they will accept the debt at a lower rate, or they may offer to transfer the debt for free, the most common form of offer is a vastly reduced interest rate for a set period of time on all balances transferred. It is not uncommon to find the major players offering up to a year, at an interest rate as low as 1%, obviously this can represent a major saving.

If you do make a transfer in this way, you need to be aware of one fact. Balances are removed from your card in a specific order, and it is likely that any purchases you make on the card you have transferred the balance too, will end up at the end of the repayment queue, many providers place cash advances, which are liable for maximum interest rate, right at the end of the queue. Because of this it is advisable to use a single card for balance transfers only, and never use it for normal purchases.



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