Category: Finance, Credit.
Balance transfer credit cards can be an effective solution, for consolidating existing, properly used debts and avoiding a high APR on an existing card. Customers should be aware of whether or not the balance transfer card s introductory rate increases over time, canceling out the benefits of the balance transfer card offers in the first place.
However, customers should be aware of what to know before applying for a card, as well as what problems balance transfer cards will not solve. They should also be aware that previous bad credit history can complicate the use of a balance transfer credit card, and that only prudent overall financial habits in conjunction with occasional balance transfer use makes for a lasting solution. The outstanding balance is high, and an interest rate that at first seemed only theoretical( "I won t have to worry about that, " the user thinks, "as long as I m careful" ) now seems disturbingly real. Anyone who s used a credit card for any period of time has likely found himself or herself faced at least once with the specter of debt: perhaps a paycheck doesn t clear in time, a friend s assistance fails to come through, a last- minute furniture sale attracts no customers. This situation is always possible, a natural product of any necessary financial risk, and there s no shame in it. And solutions exist. All that matters is finding a solution for the situation.
It s a common enough situation, that an entire, in fact variety of credit card has sprung up to cater to exactly this kind of user: balance transfer credit cards. The user is then free from whatever higher APR might have crept up on his or her existing card, and it seems as if all financial worries have been eliminated in a moment by balance transfer credit cards: the magic bullet, of the financial, it would seem world. The principle behind a balance transfer credit card is simple: the card encourages its user to consolidate his or her outstanding balance onto a single card with a very low introductory APR, often 0% . But it s important to realize that a balance transfer credit card is not a magic bullet: it s a financial solution, with its own, like any other advantages and potential pitfalls. The most crucial factor to consider is that the introductory rate on most balance transfer credit cards does not last forever. And it s important for the potential balance transfer customer to keep a few things in mind when considering whether or not to save money by using balance transfers to consolidate debts. If the user thinks of balance transfers as outright eliminating debt problems- -or at least eliminating them until some nebulous future time- -that user could potentially run out the initial 0% grace period( most often twelve months) and find himself or herself faced with an APR that typically ranges anywhere from$ 11 to$ 18- -not an unreasonable rate for someone who s expecting it, but otherwise a possibly disastrous surprise.
Some cards also have options that could be deal- breakers( an high initial balance transfer may be required) , or options that could be highly useful( some cards allow the user to maintain the initial 0% rate until all initial balances are paid off. ) As in any situation involving credit or finance, the informed customer is always the more effective customer. So potential customers should make certain to research the full details on any balance transfer credit card( or any credit card) before making the decision to apply. Another, perhaps more fundamental factor to consider before applying for a balance transfer credit card: balance transfers are not, in and of themselves, a cure for existing debt problems. Some balance transfer credit cards determine their introductory APR or regular APR( or both) by looking at the applicant s overall credit history, meaning that in these cases existing financial problems, rather than being eliminated by a card, will actually prevent the card from doing its work. They are a treatment, and one that only works in conjunction with good financial habits all around. So balance transfer credit cards should not be looked at as a lifeline or a magic bullet, an excuse for building up high balances in hopes that a timely transfer will wipe all history out: rather, balance transfer credit cards are a tool, one useful only when accompanied by general financial prudence. But before making the decision to apply, customers must remember first of all to become informed about their options, and must further remember the first rule of finance: never assume the existence of a magic solution to problems.
No one is perfect, and in the case that things go wrong and debts mount with no immediate method of paying them off in sight, consolidating balances can be a powerful( if in many cases temporary) remedy. Never substitute an attractive credit option for judiciousness and a sound financial plan.
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