Debt Consolidation With Balance Transfer Credit Card Offers

Loans For People with Bad Credit

0% credit card balance transfers are becoming so hard to find these days and according to a report by the Wall Street Journal one of the factors that contributed to this scarcity is the move of many credit card companies to change their business models which was needed to accommodate the new guidelines cited in the Card Act. Nonetheless they still exist, and when used strategically they can save you money.

But don't say you haven't been warned! If the execution isn't right, these 0% credit card balance transfers can really damage your finances.

Be Mindful Of Balance Transfer Fees When Thinking About Consolidation

By allowing customers to do balance transfers using 0% credit cards credit card companies increase their clientele which means more profit for them. A low FICO score will prevent you from qualifying for these types of offers, so be sure you have a good credit history so the only thing you need to worry about is the transfer fee which is three to five percent of the total amount that you will be transferring.

Is it worthwhile? Not always. Well, it actually depends on how long the contract is and how tempting the rates are. Consider that if there is a 5% balance transfer fee, and the 0% promotional rate lasts only 6 months, that effectively amounts to a 10% annual interest rate. A balance transfer calculator is a great tool to have a realistic amount of the money that you'd be actually saving during the term. Another thing to consider is the fact that most low interest or 0% interest cards that offer balance transfer eat up rewards points, so don't be surprised if all your points from a rewards card goes missing when you transfer your balance.

Nobody will profit from 0% interest rate so don't assume it'll last forever!

Zero percent offers are usually only for 6 months and right after that you'd be paying for a higher interest rate. To have an idea when the promotional period will end make sure that you read and understand the fine print. And as a precaution be sure you make some computations so you can have an idea if you'd actually be saving money or not. For example, if you transfer balances from accounts that already have a reasonable rate, and the 0% rate goes up to 18% after the promotional term, you may end up paying more than you would have if you just kept the debt where it was.

In addition, keep in mind that the promotional rate is contingent on performance. A late payment will mean that you are in violation of the promotional offer and for credit card companies that means you need to pay penalty charges or worse, pay an even higher interest rate for the succeeding months.

Is It Safe To Consolidate Your Debt Using Zero Percent Interest Cards?

Let's say you do follow all the things stated in the contract and you always pay on time then that means you'd have a short term benefit over your credit card debts for a span of 6 months. Any kind of savings is good, be it small or big but you have to make sure that it is not just a temporary fix for financial debt, if you have multiple types of debts then a balance transfer may not be the best solution for you.

To achieve true debt consolidation you must find the perfect fix, something that will directly address the problem, solve it and help you prevent it from coming back. A zero percent balance transfer will only serve as a temporary fix.

Will My Credit Score Get Any Better If I Opt For Balance Transfer Deals?

Okay so the thing is debt consolidation influences your credit score. On the other hand, HELOCs and some conventional debt consolidation loans will more likely increase your chances of being debt free in the long run. There's no need to stress yourself about your credit score because if you are responsible enough to make your payments on time and follow the rules stated in the contract then that will have a positive effect on your standing and that will surely improve your credit score. By opting for conventional debt consolidation loans you will definitely pay off more of your debts sooner, which means you can pay your credit card debts and all your other debts.

Also consider that opening a new credit card account and transferring balances to it can have a mixed impact on your credit score. Your total balance to available credit ratio will depend on your new credit card's credit limit but chances are it will be the same like before. And your credit will be negatively influenced by the transfer since your new card will reflect a high balance even if your old cards show a low balance. Another thing to remember, never open a new credit card account if you already have three or more active accounts as it may damage your credit score as well.

A zero percent balance transfer isn't actually the perfect solution for everyone since it can influence your credit score positively or negatively. It would be much better to find other solutions for debt relief instead of going for a 0% balance transfer if you have multiple types of debt, have existing cards with good rates or you can pay off all your debts in less than six months.

Familiarize yourself with other ways to solve your credit card problems and seek help in managing your finances.