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Will Credit Card BalanceTransfers Save Money In The End?

Will budget transfers help?

Balance transfers are often used as a strategy to get out of debt quicker. Move a balance from one account to another for a lower rate is a popular marketing strategy. It lures in new customers. Credit challenged households eagerly hope for an offer in their mailbox. They can’t find relief with alternative payroll or title loans but will the transfer ease money problems?

Creditors mail introductory offers by the masses. The offer gives the recipient an opportunity to apply not a guarantee for approval. There are several introductory rates in the offer’s fine print. The lowest rate is not guaranteed either. A credit check determines the actual rate applied. You know that old saying, “You get what you get and you don’t through a fit?” Credit challenged folks may want to complain that they didn’t get the bold printed ‘zero interest’.  The fact that they were approved for a new line of credit often keep them from doing so.

Will balance transfers save you money?

-A hard credit check may just hurt your finances more. It will take a point or two off your current score just for applying. Credit scores help determine interest rates. When higher rates are set in place, it will cost you more each month to carry long-term debt.

-Once approved, the creditor will determine your rate of interest and your credit limit. Your new card will be figured into the credit utilization rate. Other creditors review credit history every 6 months or so. Their findings may raise their card’s interest rates. What you do with one creditor is eventually known by all. Make sure your new line of credit is worth the potential effects on other debts.

-Many introductory rates are just that, a limited time offer. If your transferred debt is not paid off by the end of the introductory offer, the accrued debt is then added to the balance. Much higher rates will replace the low and will apply towards the remaining balance. If you aren’t careful, you could end up paying more in finance charges a month than if you had left the debt with the original owner.

If you have a plan to pay the debt off in the next six months, you may not want to take a creditor up on a new introductory offer. Limit hard inquiries. Keep credit utilization rates low and make all payments on time is the best strategy to limit problems. Take the six months to pay your debt off on the original card. You would not save enough to make that much difference in such a short period of time. These transfers would help save money if it’s alternative lender debt.

Think it through before you apply. Know your finances inside and out and plan your goals and objectives accordingly. You may be able to transfer high interest debt to a new low interest card. Remember, it only saves if you carry out the plan accordingly.

 

About Holly Petherbridge

I am a Blogger, Web Content Writer, Teacher, Mom. A woman of many hats. As an elementary teacher, I had always encouraged my students to write more. I find myself falling back on my own teaching techniques to share what I know about building and rebuilding personal finances.
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