by Axel Bührmann

Article by Todd Holliday

Choosing Your Balance Transfer Card

A balance transfer allows the balance of one credit card to be transferred to another card. If not done properly or done using an expensive credit card, balance transfers can be a costly process. It is important to know exactly what you are doing before attempting a balance transfer. There are several types of balance transfer cards available. In fact, there are so many different types choosing one can be a difficult and often confusing process. Understanding your personal needs and what specific purposes you plan to use the card for makes the decision easier. Three of the most popular card types are no-hassle rewards, low APR, and prepaid.

No-hassle rewards balance transfer cards allow cardholders to quickly redeem any points earned through using the card. In addition, the card posts no blackout dates, no restrictions, and no airline limitations. For cardholders that enjoy getting a little something back from time to time, this type of balance transfer card is right for you.

Low APR balance transfer cards have the obvious benefit of low APR rates. Some cards even offer no annual fees. Cardholders save a ton on fees and interest with this type of card, making it a perfect fit for those who tend to splurge once in a while or spend beyond their means.

Prepaid balance transfer cards provide the same convenient functions of a normal credit card but with the added benefit of not needing a loan to acquire one. The cards can be reloaded easily and prevent any cardholder from transferring more than they can afford. The transfer simply won’t take place if all the funds on the prepaid card have been exhausted. This type of card is well suited for individuals that have had trouble over spending in the past.

When selecting a balance transfer card, the introductory interest rate should always be considered. For most balance transfer cards, the introductory rate is low or even zero, eliminating monthly finance charges and it easier to pay off balances. The amount the APR of a particular card raises varies based on the type of card. The length that the rate lasts varies from six months to a year. Regardless of any option you consider from a balance transfer card, it is important to remember that the APR rate for balance transfers almost always varies from the purchase rate with he purchase rate generally being higher.

Balance transfer fees are another issue cardholders must consider because the fees might be so large that it offsets the benefit of the new interest rate on the balance transfer card. The fees can be flat but often times are based on a percentage of the amount being transferred. In addition, some cards charge no fee for the initial transfer and then large fees for any additional transfers. It is important for any cardholder to understand the fees that will be assessed when performing a balance transfer.

Finally, cardholders should be aware of and consider the default rate of any balance transfer card they chose. The default is the highest interest rate charged by a card and is usually applied as a penalty for going over your limit or for late payments. Cardholders should no what this rate is as well as any additional penalties that are applied. It is best to avoid being assessed these penalties but still important to know what exactly you will be facing.

Balance transfer cards have their benefits. Low introductory interest rates allow for balances to be paid off easier, but cardholders must have to means to pay them off during the introductory period or risk falling further in debt. Understanding all the features and rules of a particular card as well as your personal situation is the best way to decide what card to pick.

About the Author

Todd Holliday is an avid business enthusiast who enjoys writing about subjects such as Credit Card and Credit Cards.