Balance Tranfer Credit Cards Credit Cards

Balance Transfer Credit Cards

There is no doubt that credit cards can be quite helpful in getting the things you need sooner than saving up for them. For many Australians however, the interest rate on their credit cards can be quite sizeable which makes paying off their debt problematic. In fact, paying the minimum level each month and not making any more purchases on the cards will take years, if not decades to fully pay off depending on the interest level.

One potential solution is transferring the debt to another card that offers a greatly reduced rate. In fact, many of these balance transfer credit cards offer an introductory rate close to 0% which can save you hundreds, if not thousands of dollars in paying off your revolving debt.

What are Balance Transfer Credit Cards?

A balance transfer credit card is like any other credit card except that it offers an introductory interest rate that is far lower than standard rates. In fact, the companies that use this particular interest rate have designed their services to seek out those who have large credit card debt that can be transferred over.

Once you are approved for the card, all you need to do is transfer the balance from your old credit card to your new one. Depending on the overall credit limit, you might be able to transfer the debt from several cards to your new one so that you will pay less in interest rates starting right away.

Advantages and Disadvantages

The advantages of using a balance transfer credit card start with the significant reduction in your debt from the moment it is under the new interest rate. In order to take full advantage, you will need to start paying down on your debt quickly before the standard rate kicks in. However, if you have selected a card that has a lower standard rate than the one you are currently paying, then that is an additional advantage.

Time is your main disadvantage as most Australians that carry debt from their old credit cards cannot pay off all of it before the standard rate sets in. However, even if you only pay off a good portion of it, you will save a considerable amount of money.  

One aspect you will need to watch out for is making new payments on your card. The goal of a balance transfer is to lower the debt that you currently owe and keep that going until it is paid off. The more you add through new purchases means the more debt you will need to pay off as well. It takes discipline to manage your new purchases, but if you can keep them to a minimum you will be able to pay off your debt sooner.

Overall, the purpose of having balance transfer credit cards is to reduce your overall credit card debt and put you on the right financial path. The better you can manage your purchases and make substantial payments on what you owe, the more having a low introductory interest rate will work for you.

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