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Redistributing debt by Balance Transfer
By Kristina Porter
After having my baby, our bills and credit cards got way out of hand. And we were running out of solutions and starting to fall behind. So after a few suggestions, we started looking into balance transfers. Its a nice way of redistributing your debt to make your payments possibly more affordable. If you don't know what a balance transfer is, let me explain it a little. A balance transfer is the act of transferring debt from one credit card to another assuming the newer card has better terms and rates. When considering a balance transfer you need to look at what is being offered by the card you are transferring the debt too. What is the offer rate, offer duration, and is there a transaction fee. Usually, you will be offered one rate for your balance transfer but there are three different rates available. There is the purchase rate, teaser rate, and fixed rate. Depending on your financial situation you should choose carefully what rate is right for you. A purchase rate offer means your balance transfer will be subject to the same interest rate as the card's purchase rate. This can be beneficial if you have a really low purchase rate. A teaser rate is a promotional rate offered for a limited amount of time. An example would be 0% interest for 3 months. After the promotional period the rate is then subject to the purchase rate. Last, the fixed rate option. The fixed rate offer is a low interest rate that is fixed until the transferred balance is paid in full. This rate is usually guaranteed as long as you do not default. So choose wisely what option is best for you and your financial situation. Most balance transfers have a fee. Some are flat rate, but most are a percentage of the debt being transferred. Some credit card companies offer checks that work like a balance transfer but are for transferring non-credit card debt. You can use these checks to pay house payments, utilities, and hospital bills. They can really help you get out of a tight situation.
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May, 2012
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