Credit Card Balance Transfers Explained

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Credit Card Balance Transfers Explained
A balance transfer is an option offered by many credit card issuers which enables the card holder to use their available credit from one card to pay off the balances due on one or more other cards. Usually the interest rate on the amount borrowed is lower than the rate of the cards that are being paid off by the balance transfer.

Balance transfers are really nothing more than a consumer... Read credit cards article



Credit Card Balance Transfers Explained
A balance transfer is an option offered by many credit card issuers which enables the card holder to use their available credit from one card to pay off the balances due on one or more other cards. Usually the interest rate on the amount borrowed is lower than the rate of the cards that are being paid off by the balance transfer.

Balance transfers are really nothing more than a consumer... Read credit cards article



Credit Card Balance Transfers Explained
A balance transfer is an option offered by many credit card issuers which enables the card holder to use their available credit from one card to pay off the balances due on one or more other cards. Usually the interest rate on the amount borrowed is lower than the rate of the cards that are being paid off by the balance transfer.

Balance transfers are really nothing more than a consumer loan made to a customer who is already pre-qualified by the lender because of the credit card relationship that exists. Since the card issuer is already open to exposure for the maximum amount of the card holder's credit line anyway, it makes financial sense for the card issuer to entice the cardholder to run their balance up as high as possible.

A balance transfer offer is the perfect way to entice the card holder. Most balance transfer offers will come with an artificially low introductory interest rate, such as 1% or 0%, for a fixed period of time. After that time period the interest rate will rise to whatever was permitted by the terms of the offer.

Some offers will come with a fixed interest rate for the lifetime of the balance transfer payment period, subject to the usual penalty clauses for late payment, etc.

Although some card holders receive fee-free balance transfer offers, depending upon their credit experience with the card issuer, as well as their overall credit score, most balance transfer transaction require the card holder to pay a fee. This fee could be a flat-rate or a percentage of the amount borrowed. Typical offers these days are running 3% of the amount transferred per transaction, or $5, whichever is greater. Some offers cap the transfer fee at $50.

Consumers who pay close attention to the fine print, and who are diligent about paying the balance transfer balance off during the promotional interest rate period, can reduce their monthly expenses by transferring high interest credit card balances to the lower interest card offering the balance transfer option.

Consumers who do opt to take a balance transfer should not run up more debt by using the credit cards that the transfer was used to pay off. This defeats the purpose of paying off the balance to begin with and will quickly place the debtor in a position where they are no longer able to make their payments.

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Credit Card Cash Advance Secrets

A credit card-based cash advance is a method allowing the card holder to convert a portion of their available credit limit to cash. The method of obtaining the cash can range from using the credit card in an authorized ATM, writing special cash advance checks against the card's open to buy credit limit, or presenting the card in person at an authorized bank or lending institution. A cash advance is, in effect, a loan.

Unless the card issuer is making a special cash advance offer, receiving a cash advance, even if it is paid back quickly, is one of the most expensive methods of borrowing money. That's because of several reasons which include:

Cash Advance Fee

This is a fee that the card issuer levies whenever a cash advance is accepted. Although some special offers may establish a flat-rate fee, it is usually a percentage of the amount borrowed. Depending upon the state where the card is issued, that percentage rate can be quite high. The average fee runs between 3% and 9%.

No Grace Period

Except for some secured charge cards, issued to buyers with poor credit, charge card companies allow a grace period of 20-30 days, on average, for the cardholder to pay new charges off in full without incurring interest. This feature is usually not available when a cash advance is taken, so interest starts accruing at the moment the cash is received and continues to compound until the loan is paid in full.

Higher Interest Rates

Card issuers almost always charge a higher interest rate for a cash advance then they do for normal purchases. This may not be apparent unless the terms and conditions of the cash advance are examined carefully. Some charge card issuers may charge the maximum interest rate allowed by the laws of the state where they issued the credit card from. In the case of South Dakota, home to Citibank credit cards and several others, that interest rate can be as high as 20%.

Payments Applied To Purchases First

The credit card issuer will apply the monthly payment to normal charge card purchases first. If there is anything left after that payment is applied then it will be posted against the cash advance. This means that if a cardholder only makes the minimum monthly payment, it could end up taking years to pay back the cash advance.

Provided by Creditor Web. Creditor Web empowers consumers to compare and apply for a credit card online.




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Credit Card Balance Transfers Explained
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