Credit card balance transfers are when the money that is owed on one card is moved to the balance on another credit card.
This can be done for a number of reasons. It is quite common for a card to be changed because the bank that holds other accounts, such as the transaction account or the home loan, has changed. Alternatively the card may be moved because it offers a lower interest rate, better terms or good rewards.
There is another reason why a credit card user would want to carry out a credit card balance transfer, and that is because many credit card balance transfers can result in a significantly lower interest rate on the balance of the card. There are two main types of low interest rates, the introductory low interest rate and the long term low interest rate.
The introductory low interest rate is an interest rate that has a very low interest rate for a period of a few months, usually between three and fifteen months. In some cases the interest rate can be as low as zero per cent.
The reason why credit cards offer these very low interest rates is because they spend a large amount of money marketing to people to take on their credit cards on a long term basis. Some credit card companies have found that introductory interest rates can do the same thing for less money.
An introductory interest rate will be very low for a few months and will then go to the default interest rate on the card. This will usually be at the rate that the money that is built up through spending on the card will be charged at. However in some cases this will be charged at the cash transfer rate, which is often considerably higher.
There are some people who go from one low rate card to another low rate card before the introductory period finishes. This means that they are able to borrow money at a low interest rate for a long time. However this approach requires a good deal of organisation and discipline and a reasonable credit rating.
There are longer term low interest rates for some balance transfers. These cards will charge a higher interest rate than the introductory interest rates, but these will last longer. However when there is spending on these cards this will often be at a higher interest rate and the repayments will pay off the balance transfer first which will have the effect of letting the higher interest balance stay on the card for longer.
