Many a credit card carrying consumer has looked at the high interest repayments their credit card debt requires and began looking for a way to reduce the credit card debt.
This is the main reason for opting to switch lenders; in order to qualify for an introductory offer on a balance transfer credit card. In theory this is the perfect way to make the same repayments and repay the debt faster, by paying more off the principal amount and minimising the interest.
We say this is an effective way to reduce debt in theory as the credit card user must be disciplined and continue to make at least the same level of repayments and at all costs resist the urge to make new purchases on this balance transfer credit card.
Check which instant approval credit cards have balance transfer offers.
There are two important features of balance transfer credit cards that should be considered. The first factor or feature to consider when comparing balance transfer credit cards is of course the rate of interest on offer for your balance. These are typically very low interest rates and in some cases even zero per cent.
The second balance transfer credit card feature to consider is the term or length of the introductory offer.
Another reason to avoid increasing the debt is that any additional purchases will be charged at a higher interest rate than that of the balance transfer rate. Many people make the mistake of thinking that the same interest rate is applied to any debt on the card but that is not the case, nor are any repayments applied to the higher rate first.
Credit cards users are often mistaken with relation to the payment system applied to credit card repayments. If you were to transfer a balance of around $3,000 to a new card with an introductory balance transfer offer of 0%, and then make a $100 the purchasse will accumulate interest immediately despit the balance transfer interest rate of 0%.
Not such a big deal as when you make your monthly payment the $100 new debt will be wiped out? Wrong sir, wrong! All repayments will be applied to the outstanding balance transfer until the debt has been paid in full. The most recent purchases will continue to accumulate interest at the purchases rate until then. For this reason you should avoid making new purchases on using a balance transfer credit card.
If you want a credit card for your spending, consider keeping your old card and using it for spending – ensuring of course you repay the balance in full each month to avoid accumulating a balance to be carried from month to month.
