Getting Great Credit Card Deals and Balance Transfers

August 16, 2007

One of the many bad things about credit cards is that once you get sucked into having a large debt, the interest rates can go up. Credit card companies do this on purpose and while it may seem like they have a personal vendetta against you, I assure you that nothing could be further from the truth.

For a credit card company, it is simply business and nothing more. These companies function on the principle that the riskier a debtor you are, the more interest they're going to charge you. Think of it as them being an investor and you being their stock choice. Generally when you're investing you want to pick stocks that are very safe and that are likely to at least give you back the same amount of money you started with.

Suppose though that you did eventually invest in a riskier stock. What would cause you to do so? Well simply put, the possible rate of return is what would do that to you. If you could be sure that the stock would either double in a short period of time or bust, you might consider putting money into it because of the huge potential reward. And this is what credit card companies do. For people that have good credit, they give low interest rates and more general flexibility. For people that have bad credit, they do the opposite.

So how does this help you if you're stuck in a large heap of debt and have such a poor credit history that nobody else is willing to lend you the money you need? Well to be brutally honest, it doesn't help you at all. But there are a few methods that you might use to help you lighten the load a bit and the one I'm going to discuss in this article is a method to give yourself some short term relief from the high interest rates of your current credit card.

I'm talking about signing up for a balance transfer credit card.

Balance Transfer Cards

So what exactly is a balance transfer credit card? Well, these are cards specifically aimed at people who are not the envy of the rest of the financial world. People that have an excellent credit history, have no debt aside from their mortgage and generally are financially secure don't need any extra help; they've already got it all.

For everyone else though, there is a need of debt relief or at least temporary help while they get things under control. It's these people that might want to go ahead and consider one of the many balance transfer offers available.

A balance transfer credit card is the same as any other credit card deal, the only difference being how that deal starts out. Good credit card deals usually have some sort of introductory gimmick or hook to get you to sign up for it and balance transfer cards are no different. Their enticing hook is the ability to transfer your entire balance from another credit card to this card and for an introductory period, enjoy many different perks such as interest breaks and fee discounts.

Advantages of Balance Transfer Credit Card Deals

There are a few primary advantages of balance transfer credit card deals and three primary ones that definitely deserve consideration. Keep these three advantages in mind when you look at various balance transfer cards and only pick one that suits your needs, but also figures prominently in offering these three advantages.

Advantage #1 - Low (or no) Interest Rates

The absolute biggest advantage of the balance transfer credit card and the reason it's so popular amongst consumers is the fact that many companies will offer low interest balance transfer offers or even go so far as to offer zero interest balance transfer offers. This means that if you sign up for their balance transfer credit card deal, for the whole introductory period, you could actually end up accruing no interest on your debt!

Beware though, because this zero interest rate will only last until the end of the introductory period. After that the rate goes to normal, which could actually end up being a higher interest rate than the one you were being charged with your old credit card.

Advantage #2 - Low (or no) Annual Fees

Many credit card companies are perfectly willing to waive annual fees for a couple of years (or just one year for the more miserly among them) in exchange for receiving your business. Most annual fees are pure profit for the company and for this reason they don't mind trading a small amount of profit for the potential profit that a large amount of interest would bring.

Unfortunately, the thinking of the credit card company is exactly right in this circumstance. Many people do balance transfers in order to get their financial situations under control but for one reason or another end up maintaining a balance past the introductory period. The end result is back to square one for the consumer, but an added amount of ongoing profit for the credit card company.

Advantage #3 - Reward Programs, Oh My!

Some credit card companies in a very concerted effort to get more customers have even offered consumers rewards based on the amount of the balance transferred to the new credit card. Whether it's in the form of air miles, shopping rewards or simply cash back, some very rare companies will actually give people credit in reward form for the entire balance that they transfer.

Once again, this is a gimmick, designed to make the consumer think they're winning, while secretly being a long term investment on the part of the credit card company, one that they expect to make back many times over in terms of the interest rates they charge after the introductory period is over.

Taking Advantage of Balance Transfer Offers: Final Words

By now it should be clear how potentially advantageous picking the right balance transfer offer could be, but many people may still be a bit leery about jumping into this right away. This is a very good attitude to have, because jumping in right away is precisely what the credit card company wants you to do.

Instead, the real way to win the balance transfer game is to make a plan. Sit down and look at your current debt balance. Now imagine that for the next six months (or however long the introductory period of the card you are considering is), you had no interest on that balance. How much of it could you pay down in six months with no interest? Figure out a pay plan that allows you to pay off a large (and preferably all) portion of your debt while still allowing you to pay living expenses. If the end result is positive, sign up for the card and stick to your plan.

This is the ultimate way to balance transfer success.