When you're trying to decide what new credit card to get, there are a few that offer a low rate balance transfer and low interest for the first however many months if you switch to them. But what does that mean in real life?
Even if you don't take advantage of any other deals your creditors might offer, transferring your credit card balance could be a nice way to lower your interest rate for a few months if you already have a pretty big credit card debt.
Let's say you have $1,000 worth of credit card debt. As it is, the interest on that can easily cost you a pretty big amount, say $100. And this keeps happening every month until you can pay off the debt. If you're already having trouble paying the interest, you can move your balance to a different credit card that offers free balance transfers and a low or no interest rate on that balance for the first few months. This way, you can pay off your debt instead of the interest. After the first month with the new credit card, you'll have paid off the $100 and only owe $900. You'll have paid the same amount as if you hadn't moved the balance. You can cut that $1,000 down to a much more manageable amount in a few months. So, when the period of zero percent interest on your balance transfer ends, you'll be able to pay both the real interest and start working on paying off the whole debt.
What's the catch? This is the question that needs to be asked. If you handle it well, there isn't really one. Just make sure to read the fine print to see if there are any hidden fees. And try to avoid details in the contract that lock you into a long, expensive payment plan or something else that comes up later. Most of the time, though, if a balance transfer would be helpful enough for you to think about it, the other fees aren't that big of a deal. It doesn't mean you can ignore them, but they're not the main thing to worry about when you transfer your balance.
If you keep switching credit cards, you could cause some pretty bad problems in the long run that won't show up for at least a few months. Why? It shouldn't be a problem the first time or two that you move the balance to another creditor. Some credit cards get a lot of their new customers from people who switch from other cards, but each time you switch, it goes on your credit report. Most of the time, when you transfer your balance to another creditor, they won't be too impressed if you leave them soon after their low interest rate ends. But if you use it carefully, you can save a good amount of money.
