X Who Opens A Credit Card Account At A Given Rate, Say 99%

Category: Finance, Credit.

In recent years, credit cards have become a major component of everybody s life. Keeping a balance on a credit card account is today a very common thing and interest rates are a dominant factor in peoples daily finance.

It started as a convenient spending tool but now it has become a reasonable way to gain access to much needed credit in the form of cash and loans. As newer credit cards are issued every year, a balance transfer between credit cards is a common way for many to reduce their monthly payments and fees to lending organizations. Most credit cards offer introductory rates that are as low as zero percent and very often this low interest is kept up to twelve months. If the credit history is kept in good standing, a balance transfer can be much easier and rewarding as most credit cards will be willing to grant a new loan to obtain future customers. Clearly, if someone has a very high interest rate on a credit card, he or she will save a lot of money if he/ she can transfer its entire balance into a different credit card. But that is a dangerous game to play. But a balance transfer between credit cards can actually be used effectively for years by switching from one card to another while paying down the overall balance.

Let s take for example, Mr. As he uses his card, he decides to carry a balance and just make the minimum payments. X who opens a credit card account at a given rate, say 99% . Within a few months, his balance or principal will most likely be the same and his minimum payments will only be paying down a percentage of the interest. X to transfer his balance. Let s assume now that another credit card issuer offers a 99% interest rate to Mr. Mr.

Furthermore, let s assume that a year later a third credit card issuer offers 0% interest rate. X will save 5% right off the bat by moving his balance. In this case, Mr. But obtaining a balance transfer credit card has a few rules that need to be followed. X can transfer the balance yet again, effectively eliminating the interest paid for the period offered. We already mentioned the fact that your credit history must be in good standing. Another important factor is fixed fees that are involved in balance transferring.

The balance to be transferred should not be too high or at least in the price range that the other credit card is willing to lend. Because of the potential for significant balance transfer fees, before making a final decision on balance transfer card it is very important to compare the net benefit of the card offer. At least two more elements must be taken into consideration regarding balance transfer credit cards. Simply put, because of added fees and surcharges, the other credit card offering a low or even a 0% interest rate might not be sufficient to justify such transfer. First to consider is the duration of the lower interest rate offer and second, is the amount of credit available for the actual transfer. In this case, it is possible to find many credit cards that will guarantee the same introductory interest rate for the entire life of the balance that has been transferred. The duration must be for a sufficient amount of time and the interest rate at the end of the promotional period must be lower or equal than the original interest rate.

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