If you are new to stoozing and haven’t had much involvement with credit or credit cards in general you may not understand the term ‘balance transfer’. It is a term you will see used a lot on this site as it forms the backbone of stoozing.

Balance transfer is essentially the transfer of debt from one credit agreement to another. Mostly we are talking about transfer of a credit card balance from one card to another with a more favorable APR.

Credit card companies offer special balance transfer deals to bring in new customers. The deals are naturally good, usually better than any standard rate offered by a credit card. These deals usually expire after a period (3-12 months), and are replaced by the companies standard rate.

Consumers choosing to transfer a balance will save money on interest charges, this extra money can be used to pay off the balance earlier or to give the consumer more to spend each month. Wiley consumers (or ‘rate tarts’) change their card as soon as the introductory balance transfer rate expires by performing a series of balance transfers, essentially keeping their debt at a low or 0% interest rate indefinitley. Greedy credit card companies do not like this but there isn’t much they can do about it

There are potential pitfalls with balance transfers. Consumers should read the small print of any contract they enter. Pitfalls include charges to perform the balance transfer (which may exceed the potential saving or profit to the consumer), different APR rates on spend and payments against the card being applied to the lowest APR item first among others.

This entry was posted on Wednesday, February 7th, 2007 at 2:27 am and is filed under Stoozing Basics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.