If you’re like most of us, you went a little crazy when you first started using credit cards. After all, as long as you made a small monthly payment, your credit limit kept going up, up, and up some more. Unfortunately, at some point, we come to the point where we just can’t afford to pay any more than we already are in payments. Then, along come balance transfer credit cards.
Benefits of Balance Transfer Credit Cards
Balance transfer credit cards allow you to consolidate all of your credit card debt onto one card. Best of all, they usually offer a ridiculously low interest rate. It’s not at all unusual for people with good credit to be able to get a credit card with 0% interest on the transferred balance.
Why they Do It
Of course, the credit card company isn’t doing that for you just because they like you. Rather, the reason such attractive rates are offered are that you’ve already shown yourself to be a good credit risk, and the credit card company is banking on the idea that you’re not going to stop using a credit card.
As long as you make payments on your balance, this can be a good thing for you. Unfortunately, though, some people only dig themselves a bigger hole. By not having to pay any interest on the existing balance, many are sucked into charging until they are out to their credit limit or ability to pay again.
Potential Pitfalls
The problem with charging a lot of money on credit cards and then paying the minimum is that you never get rid of the debt. Recent legislation forces credit cards to set minimum payments which pay off at least some of the balance of the credit card, but paying the minimum will still leave you paying interest rates on the same money over and over again.
Don’t get us wrong. We’re not saying you shouldn’t transfer your credit card balances. If you are currently paying interest on your credit card balance and you are offered balance transfer credit cards with a lower interest rate (or better, no interest) you’d be crazy not to do it. What we are saying is that you should use that time when you don’t have to pay interest to whittle down your balance.
