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by Answerbag Staff on November 27th, 2009

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What is a Balance Transfer?

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  • by Hayley Harrison on November 27th, 2009

    Answerbag Experts

    Great Answer

    Professionally Researched. (What's this?)

    At the end of 2008, Americans owed a total of $972.73 billion to credit-card companies, according to CreditCards.com. In some cases, consumers attempt to reduce credit-card debt through balance transfers.

    Identification

    A balance transfer is when a credit-card holder pays off all or part of a balance with another credit card.

    Reasons

    In some cases, consumers transfer credit-card balances to consolidate all of their credit-card debt into one card or to take advantage of a low interest rate offered by another company for balance transfers. Other times, balance transfers are done to earn points for airline miles or other purchases.

    Process

    Some credit card companies will handle the balance transfer on behalf of the cardholder. In other instances, consumers write convenience checks provided by their credit-card companies and mail them to the companies that issued the cards with the balances they wish to transfer.

    Warning

    The low interest rates offered for balance transfers often are temporary and revert to much higher rates after a specified period. Also, many of these low rates can be changed without notice by the credit-card companies if a cardholder makes a payment late, even by one day.

    Solution

    For those who qualify, a consolidation loan from a bank or credit union often is a safer way to receive a lower interest rate and eliminate some credit cards. Consolidation loans offer fixed payment sat a fixed interest rate for a specific period to pay off the debt.

    Source:

    CreditCards.com: Statistics

    BankRate.com: Balance Transfers

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