A balance transfer simply involves transferring the balance from one or more of your current credit cards to another card with lower interest rates.

To consumers with an already staggering amount of debt, it might seem counterproductive to get yet another credit card.

But in our sluggish economy, balance transfer credit cards can play an important part in your personal budget management system if you use these cards correctly.

Before you jump on a great-sounding credit card offer, you should seriously consider the advantages and disadvantages of using balance transfer credit cards and decide if one of these cards is right for you and your financial situation.

ADVANTAGES OF BALANCE TRANSFER CREDIT CARDS

Lower Monthly Finance Charges

The primary advantage of using balance transfer credit cards is that you can immediately reduce your monthly finance charges.

By transferring the balances from your high-interest credit cards to a card with a lower interest rate, more of your payment goes toward the principal balance instead of interest charges.

Pay Off Your Bills Quicker

If you pay more toward the principal balance, you can pay off the total balance in a shorter amount of time. Try to get a balance transfer credit card with zero interest if you can.

If you don`t qualify for an interest-free card, just make sure that the non-promotional APR is better than your current card and you`ll come out ahead.

Fewer Bills

Another clear advantage for consumers in the balance transfer credit card game is that you can consolidate your credit card debts to one card, which leaves you with fewer bills to pay every month. This should make your debt more manageable and your bill paying easier.

Great for Short-Term Purchases

Balance transfer credit cards are a great way to save money on larger, short-term purchases. After you make your purchase, you typically have six to 12 months of zero or low interest charges.

Just make sure that you can pay off the balance in this amount of time or you could end up paying far more on your purchase than you initially planned.

Reduces Your Credit Ratio

If you transfer your current credit card balances to one of the balance transfer credit cards, you reduce your outstanding debt to available credit ratio.

This ratio is one of the factors lenders consider when offering you new types of credit. Having a reduced credit ratio can help you get lower interest rates on new credit cards, home loans and car loans.

DISADVANTAGES OF BALANCE TRANSFER CREDIT CARDS

Balance Transfer Fees

Even if you snag a balance transfer credit card with zero percent interest, this doesn`t mean that the card is absolutely free.

Most card companies charge you a fee every time you transfer a balance.

These fees are typically a percentage of the balance you are transferring, which really adds up if you transfer large balances.

Be aware that some companies charge a higher balance transfer fee if you transfer a balance after you receive the new credit card.

Only balances that you transferred when you applied for the card qualify for the lower fee.

Teaser Rates

Teaser rates are the advertised rates that you enjoy during the card`s promotional introductory period.

After the introductory period is over, however, the interest rate increases to its normal APR, which is often quite high.

If you can`t pay off the entire balance before the teaser rate is over, your interest rate and, therefore, your monthly payment can increase dramatically.

No Late Payments

Some of the balance transfer credit cards make up for their low interest rates by charging high fees on other things. Some companies have a “universal default” clause hidden in their fine print, which gives them the right to hike up your interest rate if your payment is just a day late.

Your Credit Score May Be Negatively Affected

Although consolidating your debt can reduce your credit ratio, transferring balances might hurt your score. Your credit score gets dented every time you have a credit card balance that’s more than 30 percent of the card`s total limit. If you transfer a balance to a card without enough available credit, it can cause your credit score to take a dip.

Must Have a Clean Credit History

Zero or low interest credit cards are typically only offered to folks with a good credit score. Ironically, if you have a history of late or missed payments, you probably won`t qualify for a credit card with a great interest rate.

WHAT TO DO

If you don`t qualify for zero or very low interest rates, search for a card that`s at least five percentage points lower than your current credit card. Shop around, comparing transfer fees, annual fees, grace periods and the regular interest rates.

Avoid any cards with introductory low interest rates for eight months or less. These generally don`t do you much good unless you are absolutely sure that you can pay off the entire balance during that short amount of time.

Steer clear of balance transfer credit cards that charge you more than two percent on your balance transfers. It`s better to use one that charges a flat fee of no more than $50 for all transfers.

If you are drowning in debt, a balance transfer card might just be your life preserver. Use a credit card comparison tool similar to a mortgage calculator to find a new card that meets your personal needs.

Make sure you read the fine print on your card before using it, however. You need to know how much the regular interest rate will be and when the teaser rate expires. Balance transfer credit cards can be very effective debt management tools if you use them to help reduce your personal debt.

Some people in the credit industry believe that someone who maxes out a credit card (or falls into other types of debt) can’t be trusted with a brand new account.

Is this true?

The correct answer is that no one can say for sure…except the lending company who is providing the credit.  Credit is not a source of money.  Credit is a gift, a gift that is offered by a merchant or bank issuer that trusts the individual consumer to pay off a charge honestly.

So why is there the need for poor credit credit cards?

The majority of people do not sign up for credit cards with ill-intent.  That is to say, they are not looking for an opportunity to abuse the credit system. 

What usually happens is that a person impulsively spends until the credit limit runs out.  Of course, it doesn’t help that credit card interest rates are so high and can inflate your total balance to well beyond what you originally spent.

It doesn’t help that merchants are doing their worst to get consumers to spend money that they can’t afford.

Merchants make it easy to charge a gift on a card; some even offer to delay payments until months or even a year after purchase.  Children are given credit cards, despite having no credit history to prove they are safe spenders.

Sometimes poor credit credit cards are necessary for other reasons besides impulsive spending.  Sometimes credit cards are used for emergency situations. 

If a person suffers a major medical incident that can easily put the whole family out of work.  Guess where that money comes from?

From credit cards!  You also have to take into account divorce, which often results in one mate intentionally sabotaging the other one’s credit, or at least a division of all assets that hurts the wealthier mate. 

So while some may visualize bad credit consumers are as immature and hazardous buyers, the truth of the matter may be something totally different.

So the big question is… how does one get poor credit credit cards?

Most banks are not willing to take a risk on a person with a low credit score.  Therefore, the best option is to look for a subprime financial institution. 

You may still get the same Visa or MasterCard but the lending company will have slightly different terms than a typical bank.  You may have to pay higher interest rates or higher monthly payments once your application is approved.

These poor credit credit cards can be attained by submitting an application meeting minimum criteria.

The company will still want to know that you are employed or at least have a regular means of income.  The company will also consider your residential history as this can be a sign of good credit. 

Just because a person has had financial difficulties in the past should not disqualify him or her from the finer things in life.  Poor credit credit cards can provide you with emergency or leisure funds even after the banks say no.

Everybody agrees that credit cards are very easy to use right? You just swipe and sign. You don’t even have to know cursive…you just scribble down a doctor’s signature and take your bag of items.

Now qualifying for a credit card is a different story.

You might know right off hand that bad credit usually disqualifies you from opening a new credit card account. However, did you know that having no credit history or having little credit history can also count against your credit score?

It’s true. Not having any history with credit cards is just as risky as having adverse credit items.

Furthermore, having only one card with a small credit limit doesn’t do you any favors.

Ideally, you want a few open accounts with medium to high credit limits so that you have access to a lot of credit and thus have positive credit utilization. So how can you qualify for easy credit cards and new accounts? First of all, try and selectively apply.

Applying for multiple cards at a time actually lowers your credit score. What bank or card issuer you apply with will depend on your unique situation. If you are a young person or new to the country, then you might do well with a limited credit bank card.

Sometimes children can qualify for a credit card account based upon their parent’s name.

If you have a job or a residence of your own (with utility accounts) this is favorable credit that can certainly get you started. What if you used to have a credit card and other accounts but have been relatively inactive for a number of years?

Check to see if the accounts you remember are still open. Some companies will automatically close accounts after a period of inactivity, whereas others may have to be ordered closed by the cardholder.

In addition to credit cards, remember that store cards, utility accounts, vehicle notes and rent can be considered good credit. It isn’t easy getting credit cards but a lack of credit history is sometimes better than a bad history with multiple liens, judgments and repossessions.

On the subject, what if you want easy credit cards but cannot seem to qualify for new accounts because of your adverse credit history?

If this is the case you may have to look into subprime lenders.

These lending companies don’t have sterling reputations like a well known bank would, but they do have a base of consumers they work with. These companies may or may not require some form of collateral, depending on the type of credit limit you hope to get.

However, all of these contracts will require that you have some sort of income and residential history. Rent, utility bills and vehicle notes do count as positive credit items. Remember this and don’t be afraid to make inquiries!

The best way to go about finding easy credit cards is to study your credit report and then proceed to apply at a financial institution that works with your credit profile.