When you are faced with mounting debt, the idea of opening a new credit card account may not seem like the most intuitive solution to your problem. However, there is a case in which opening a new account is exactly the right thing to do, and might save you a lot of money in interest and fees. That exception would be a credit card balance transfer. By transferring a balance from a high interest rate credit card to a lower rate credit card, you can save hundreds of dollars and pay down your debt faster.
In order to lure business, many credit card companies will offer balance transfers from high interest credit cards, sometimes for free and sometimes for a fee. With a low introductory rate, or even 0% interest for the first six or twelve months, you can transfer your existing balance to a new card and begin a grace period of low or non-existent interest rates. For the savvy consumer, this strategy is an excellent way to reduce credit card debt, because it gives you a chance to start paying down a high credit card balance without incurring a too much in finance charges.
If used at the right time, a balance transfer is a great tool in your financial planning. However, it does require diligence. Read the fine print before agreeing to any deals and make sure you are not about to be hit by hidden charges such as high annual fees, or joining fees. Some banks charge a transfer fee, which is often a percentage of the balance transferred. It helps if there is a cap on that amount, such as seventy five or ninety-nine dollars. As always though, make sure you make your payments on time or you might lose any introductory interest rates you may have. A late payment usually means that your interest rate goes back up again – and undoes the entire point of making the balance transfer in the first place.