Smart Use of Balance Transfer Credit Cards

Like most credit cards out there, balance transfer credit cards can be a great assistance to your personal financial situation if they are used responsibly; alternatively they can drag you deeper into debt.

Balance Transfer Credit Cards are specifically designed for someone to aggregate all their debt onto one card. The card company will usually advertise a low interest rate – even a zero interest rate – for a short period of time, in order to win your business; the benefit for you is that you can use the new card to pay off other debts that may be at a high rate of interest, without adding much to the interest payments required on your new card. The debt then stays on one card and you theoretically have a period where you can pay the debt off completely. That's the smart way to use balance transfer credit cards.

Personal finance sites in Australia will list all of the best such cards on their sites and you can search specifically for them by zero or low interest balance transfers. This allows you to easily compare between card offers. Also listed will be the APR, the interest-free period (if applicable), the annual fee and cash advance rate. Normally if there is a very low balance transfer rate – like 2.9% for 6 months for example – the APR and the cash advance rates will be very high and this can lead to later problems.

Balance transfer credit cards are fine if you adhere to a couple of golden rules. Firstly, don’t use your card to buy other purchases during the balance transfer period or you may see a very high interest rate applied; secondly, make sure you pay off the original debt within the balance transfer period or, again, high interest rates may be applied – perhaps the cash advance rate, which can be very high. When you compare Balance Transfer Credit Cards you should check for these interest rate details as they may become important for you 6 months down the line if you haven’t paid off the debt.

Sometimes "unbelievable" offers jump out at you. Be careful of these. If something looks too good to be true it may be just that. A card offering 0% balance transfer and 0% APR for the first year is trying hard to win your business, but the question is how will they make their money? Check the fine print and make sure you know what the interest rates will be after the one year period has passed: they may shoot up to extortionate rates and catch you out. Of course this is fine if you are financially switched on enough to take advantage of the deal for year and then change your card, but check again in the small print that this is allowed.

For more information regarding balance transfer credit cards, balance transfer credit card offers and credit card interest rate, please visit: www.lowerbills.com.au