Credit Card Balance Transfers

Written by Jessica Duquette
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Credit card balance transfers are an excellent way to reduce finance charges and can help pay off credit card balances in a shorter period of time. By transferring a balance to a new credit card you may be able to save thousands of dollars by shifting the balance from a card with a higher rate to one with a much lower rate. Credit cards that accept other balances often charge those transfers much less interest than they do for purchases.

Saving With Credit Card Balance Transfers

There are many calculators available online that will give you an idea of how much you can save in interest charges; here is a brief example. Let's say you have $8,000 in credit card debt on a card that charges you 18 percent. Making the monthly minimum payment of $200 will pay off the balance in 30 years and cost you over $11,000 in interest charges! If you are able to transfer the balance to a new card that charges 7% you will pay the balance in 13 less years and can save over $9,000 in interest.

Although some of the above numbers may change depending on monthly payments and how long the balance transfer rate is applicable, you can see the possible savings. Even having a low rate for six months will allow you to pay down more of the balance and free yourself of debt much faster. Credit card balance transfers can allow you to get out of debt quicker and dramatically cut down on payments applied to finance charges.

Possible Roadblocks

Despite credit card companies wanting to take on balance transfers, there are potential hindrances to transferring a credit card balance. It is very important that you have a good payment history with your current credit card in order to transfer a balance. Financial institutions may also look at your history to determine if you open up several new accounts within a short period of time. If you tend to stay with one card only until the rate increases then that company may want to reconsider offering a full balance transfer.

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