The Awful Truth About Credit Card Balance Transfers

This article aims to tell you the awful truth about how banks apportion the month's repayment of interest by allocating various levels predicated on the different rates of interest that they charge, so that users of credit card balance transfers will invariably be punished for borrowing, whatever they do. It also shows why it is essential to replace that credit card once the introductory credit card balance transfers period ends.

A premier finance supplier lately launched a television advertising campaign that focussed on the fact that most banks designate peoples' usage of their cards into particular groups then allocated a particular interest rate to each group. These hierarchies were based on the spending of typical card users. Such people include holders of credit card balance transfers.

If you go by what the advert is saying, most credit card companies accept the credit card user will begin usage of the new credit card by transferring a previous balance for an average period of 39 weeks. The deal will be at 0 per cent interest for that time. The credit card user will make a new purchase with this new credit card that will on average draw a rate of around fifteen per cent.

The credit card holder may then use this credit card balance transfers procedure for getting hold of some quick cash with the same card (never a good strategy!). Your interest rate for taking out cash is higher than the rate for purchases, and this is on average between 17 per cent and nineteen percent but can be as much as 23 percent or even more than that.

Now here's where the financial trickery starts. When it comes to the monthly payment, the credit card balance transfers card lender will put the least expensive transactions at the top of the queue when the time comes to pay the minimum, or whichever level of repayment has been chosen.

Therefore the costlier aspects of your credit card account - usually the cash borrowing - is effectively ignored where it will rack up greater and greater amounts of interest, and where all that interest will be further compounded and carried forward when interest is charged to the existing debt (we all know how it works, don't we?)

Your average user of credit card balance transfers may believe that they are paying off the debt in a uniform way, and that if one type of cash attracts a higher interest rate then that will be balanced out by the goods purchase which will be charged out at a lower interest rate. But of course that is not what is happening. The fact is that the credit card company will always put the less costly portion first in the paying hierarchy, and allow the costlier elements to burn your money away.

These costlier elements will be last to be paid, and you are not in control of this. To take a typical example, for the nine month usage of an average credit card balance transfer's interest-free period all the payments will be used to pay the interest-free part while the more expensive purchase (or cash) borrowing clocks up the interest.

Crucially, the more expensive part of the borrowing will be at the back of the queue, clocking up the interest, and this is paid off last, if ever. Last of all to go will be the cash advance, with its massive 23 percent or whatever it is. The bitter irony here is that the longer the so-called interest free period of grace, the longer the length of time this amount is allowed to rack up the interest! Then when you add on the percentage charge that most credit card balance transfers nowadays charge for making that balance transfer, then you know why the banks are making so much money out of us.

The only answer to this is to get rid of the credit card balance transfers at the end of the zero interest period by transferring the entire balance to a new card. That is the only way to do it. To do otherwise is to invite a cycle of endless debt.

Gordon Goodfellow is an Internet marketer and technologist. His credit card sites automatically alert customers when their interest free period is about to end. See credit card balance transfers; the UK site is credit card balance transfers

Interest Free Balance Transfers

A credit card is a big financial tool for the modern urban life. It is in simple terms a kind of cash which is more convenient to use and carry than providing consumer protections under federal law. As the economic pace is slackening and slowing down, a number of card holders are looking to make way for lowering their monthly expenses. Credit card balance transfers facilitate transfer of all the credit card balance to a single account of credit card. But the main factor that plays a very important role in making such decisions of transfer of balance to and from credit cards is the rate of interest that it charges.

An article published in Credit Cards Magazine says that the profits for the credit card companies were the highest in 2004. However, it is quite understandable that that the credit card market has reached a point of saturation. Therefore, it can be very well assumed that an account often gets closed for the opening of another one. So for the credit card companies it is always desirable to open a new account on almost every occasion and every opportunity. Most of these companies offer free interest balance transfer facilities for those interested to transfer their balance. Many of these are called 0% APR. But most of the time the zero percent interest does not last for a long time; these offers are generally put forward to attract the potential customers to transfer their balances to the new credit account.

But in the earlier days it was not so. Usually the rate of interest for such cases was at least 18%. Low interest rates and 0% introductory rates for balance transfers have been in process for not much time, but thanks to the competition of various companies, they all have set such interest free schemes.

Balance Transfers provides detailed information on Balance Transfers, Credit Card Balance Transfers, Card Credit Interest Balance Transfers, Interest Free Balance Transfers and more. Balance Transfers is affliated with Guaranteed UK Credit Cards.

Choosing A 0 Balance Transfer Credit Card

Many of us have been in this situation, two or three credit cards with balances and a high interest rate being charged monthly. If you can only pay the minimum due each month, you will never get ahead. The majority of your monthly payment is being eaten up by interest. There is a way out of this situation and that is with a 0 Balance Transfer Credit Card.

A 0 Balance Transfer Credit Card is an offer that gives you an introductory 0% APR, usually for the first twelve months billing cycles and allows you to transfer the balance from high interest rate credit cards to your new account. With a plan and discipline, this allows you time to pay down your principal interest free.

Like all consumer products, 0 Balance Transfer Credit Card offers are not altogether the same, so you really need to do your homework and compare the fine print of each card. You need to be certain that the card you finally decide on will give you exactly what you want and that's to pay down as much of your debt as possible during the introductory period. It?s also wise to know what the regular interest rate will be once the introductory period is over should you not be able to pay off the entire balance during the introductory time.

Some cards offer the 0% APR for balance transfers as well as new purchases and cash advances, while other issues only offer the 0% APR for the balance transfer only. Please be aware that payments are applied toward the lower interest rate balance. So if the 0% APR only includes the balance transfer and you charge on your card, any payments made will be applied toward the 0% APR balance until it is cleared.

There is a charge for transferring the balance to your new account, ranging from a minimum of $5, to a maximum of $75. This transfer fee is for each balance you move over to your new account. Review each offer carefully to see what their proposal is.

When your new 0 Balance Transfer Credit Card account is approved, you will be given a line of credit depending on your credit worthiness. You will only be allowed to transfer the balance from the higher interest accounts to within the set credit limit of your new account. Should you make a late payment or go over your line of credit, your introductory offer will be withdrawn

A 0 Balance Transfer Credit Card can be a useful tool in paying down your debt, interest free, if you have a financial plan and stick to it.

Bradley Carson is the owner of Apply Online For a Credit Card at http://www.cards-king.com, a website created to bring concise credit card information and introduce offers from premier financial institutions. See Brad's current recommendations of 0% Balance Transfer Credit Cards at http://www.cards-king.com/categories/balance_transfer_credit_cards

Balance Transfer Disasters

 

There has been a rapid growth in the availability of zero per cent rates in the credit card industry. These have been caused by the combination of very low national interest rates, and the injection of fierce competition from American lenders such as Capital One. The UK credit card industry is now recognised as one of the most sophisticated and competitive credit card markets in the world.

One of the most popular innovations in the past number of years has been the introduction of the zero per cent balance transfer. This has revolutionised the finances for many indebted customers. How it works is if you have very high interest charges on one of you?re out standing credit card balances, then you can transfer it to a new credit card. In exchange for getting your business in this way, the new credit card provider will give you a zero per cent interest rate on the sum transferred for a period of usually, six to nine months.

While taking advantage of these zero per cent offers is highly advisable, as it can save you literally hundreds on interest charges, there are still precautions that you should take if you wish to avoid some costly mistakes. The first thing to realise is that there are different types of zero percent. What you will most likely come into contact with is zero per cent on balance transfers or zero per cent on purchases. You must not confuse the two.

If you have zero per cent on balance transfers then that will not mean you have zero per cent on purchases, so any purchases you make during your zero per cent period will not be at zero per cent but at your standard rate. This can be very important if we look at the situation using an example.

Supposing you have five thousand pounds on a credit card a 15%. If you transfer this to a card that gives you 0% on balance transfers for nine months you will save hundreds on interest. However, supposing the new card has a standard rate of 15% also. Now, if you have your five thousand on it safely at 0%, but suppose you make one hundred pounds worth of purchases. And then you pay back one hundred pounds; the one hundred you pay back will be applied to the first one hundred of the five thousand-balance transfers. This will leave you with 4,900 left at zero per cent on the balance transfer, and 100 as a purchase that attracts the standard 15%.

In this way you can quickly see how a zero per cent balance transfer can become a 15% purchases balance.Peter Kenny is a writer for creditcards-gb For additional articles and an extensive resource for everything about credit cards, please visit us at http://www.creditcards-gb.co.uk and http://www.creditcards2go4.com