Balance Transfer Credit Cards Explained

As credit card issuers seek ways to attract new customers, many use offers such as balance transfer deals. A balance transfer deals means exactly that, credit card companies will allow new customers to transfer their existing debt which is carried on an existing card and incurring interest, onto a new card issued by the new company. Once the debt has been transferred card issuers in their effort to attract new customers offer an introductory interest rate for a period of time, which is either very low or even interest free. It is not unusual for the interest rate to be as low as one or two per cent or even zero during the introductory period, which can last anywhere from six to eighteen months.

Balance transfer credit cards are an excellent way for savvy borrowers to reduce their overall credit card debt, by allowing them to pay down the principal amount, whilst not incurring an interest rate charges.

Some care must be taken when assessing balance transfer deals however, because all of them come with fine print attached which more often than not include hidden charges. Some card companies for example charge borrowers a fee for transferring their balances, which is usually a percentage of the total balance that is transferred. This means transferring a balance of a few thousand dollars, can end up costing the borrower a few hundred dollars in charges, and may not make financial sense.