CREDIT CARDS » Credit Card Rates

If you've got an enormous credit card bill and you're paying an ugly interest rate on it, then you may want to transfer your balance to a new credit card in order to take advantage of a low interest rate introductory offer. Many credit cards will offer zero or low interest rates on your balance for a few months, which many people will find very appealing. But before you do, consider the pros and cons of the long term credit history on your current account versus transferring your balance to a new credit card card account.

On the one hand, transferring your balance from one card to another makes a lot of sense if the new card has a particularly appealing introductory offer. What could be better than paying 0% interest on your credit card balance for six months (other than having the whole thing magically disappear, or winning the biggest lottery ever)? This grace period could allow you to make real inroads in paying off your debt; for this very reason, many people choose to transfer their balances to new cards.

On the other hand, credit bureaus like to see people remaining with the same credit cards because it suggests stability and consistency. The longer your relationship with a credit card, the longer you've been making payments and staying in the company's good graces. That means a lot, whereas a person who is constantly transferring their balance comes across as flighty and shifty. Additionally, transferring your credit card balance is not cost-free. If you miss a payment to your new credit card during the introductory period, you could see your zero or low interest rate vanish, to be replaced by something higher than your old credit card's interest rate.

A general rule of thumb is that transferring your credit card balance from one card to another definitely makes sense sometimes, but if you think you can keep on doing it in order to escape any kind of an interest rate you're making a questionable judgment call, and creditors and credit bureaus can pick up on that. To determine whether you should stay with one card over a long period of time or transfer your balance to a new one, be sure to consult with a credit counselor.

For more understanding of how credit works check out credit articles on Go Banking Rates.

People who have some type of credit will have some type of debt. These debts come in various forms, such as credit card balances, student loans, auto loans, mortgage loans, etc. However, there is a difference between good debt and bad debt.

Good Debt Can Keep Your Credit Healthy

When you have good debt, it can help keep your credit score up and your finances healthy. On-time mortgage payments or student loans are examples of good debt. These types of debt are payments for things that will go up in value. When you pay your mortgage on time, you are helping your home to increase in value. A student loan can show that you are building your skills and that you are employed. These are ways in which you can prove to creditors and other financial institutions that you are a good candidate for future credit because you are building a strong financial foundation.

Bad Debt May Damage Your Credibility for Future Loans

If you use a credit card to pay for everyday items such as groceries or utilities, you may be accumulating bad debt. These are the types of debt that will not go up in value and, therefore, are not creating a strong financial history. They are not investments. Other examples of bad debt are using credit cards to pay for vacations or other expenses that will not grow in value. It is important to pay these types of debt off each month to help keep your credit score up.

By investing in good debt, you are creating valuable accounts that can prove you are financially responsible. Bad debt may send you down a path towards unmanageable finances if you are not careful of your spending habits. If your investments are growing in value, they are also contributing you with a strong and healthy financial future.

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