What is a balance transfer in terms of credit cards?

Question

...and why is it important?

Answer 1

A balance transfer allows you to transfer your balances from other credit cards to the line of credit offered by that company.
(As long as you have sufficient credit available.)

Be really careful with balance transfers, some companies charge a fee for this. Others offer balance transfer offers where the lower rate is for a very short time.

Read the fine print.

Answer 2

In an effort to lure consumers to their credit card, many companies offer free balance transfers from your old credit card. Once the money is safely owed to the new company, they will often provide a grace period where they charge far less on the transferred balance. Finding two, one, or even zero percent interest is possible. Oftentimes this introductory rate lasts for around six months to a year after the balance transfer takes place.

For a savvy consumer, this can be an excellent method of reducing credit card debt. It leaves the person free to pay down the balance on a credit card without incurring interest charges. Using this strategy, a person could potentially open a new account that offers a balance transfer when the old one expires. Then transfer all of the balance to the new card to begin a new grace period of low or non-existent finance charges. If you plan to do a balance transfer, be sure to close your old account immediately; having more than two credit card accounts open may damage credit scores.

Answer 3

Ah yes, I do this one all the time. Checking the duration of the initial offer period, make sure that in a couple months you aren't paying more in interest than you are currently. A balance transfer pays off a credit card at say 19% interest and puts it on a new card with 3% interest. The down side is it will take longer to pay off the credit card and any purchases made on that card will usually be at a very high rate. The upside, if you keep one card for purchases and the other for balance transfers, you can keep your monthly payments down. But please, before doing anything like this, read ALL of the small print! Some cards give a great introductory offer, 1% for 6 months then kick it up to 6% after that, but if you are as much as a day late on your bill it can jump to 22% or more!

Answer 4

balance transfer allows you to transfer the balance of an existing credit card (major or department store or gas card) to another card.

This benefits you if your current card has an interest rate higher than the card you will transfer to.

I did this recently. I got a Washington Mutual card that had 0% interest on balance transfers for a year, with a 3% transfer fee. I transferred my Mastercard (interest rate of 14%) and Spiegel (interest rate of 22%). I am paying off the Washington Mutual card within the year time frame, and I don't make any purchases on the card.

Answer 5

You can sometimes extend due dates and save on interest charges by moving your balance due to another charge card. Their promotions are always popping up in ads. Eventually you will have to face the music and pay the balance due off, and a large number of credit cards may not look too good on your credit report. If I cant pay off the card when it comes due I personally dont use it.