Many consumers who are using balance transfer credit cards are currently doing so due to the fact that consolidation can be beneficial for their situation, and credit cards that offer this balance transfer opportunity have commonly been allowing consumers to consolidate these debts at a low introductory rate, or in some cases will allow cardholders to group debts on this card and will give them sufficient time to pay off what they owe without any interest charges at all. While this may be well-known by some consumers, there are questions as to whether what should be done with old credit cards, particularly when this balance transfer comes from multiple credit card obligations that may be attached to higher interest rates than a consumer is currently seeing on their balance transfer card.
In some cases, a balance transfer will not be best for a particular card holder, and even those who are in a position to get one of the best rates, which may currently average from anywhere between 12% to 16% or higher, there are those who make the mistake either closing old credit card accounts or racking up more debt on these credit cards, which could be a hindrance to a consumer’s overall financial health. In these cases, consumers run the risk of finding themselves in a very poor financial position as a result of acquiring more debt than they may be able to handle, particularly when consumers have used a balance transfer as a way to find more affordability on debts that may have been causing a strain on their financial lives.
Yet, some consumers may also make the mistake of simply closing out credit card accounts as a way to avoid the temptation to acquire more debt on credit cards which has recently been paid off through this balance transfer consolidation, but some financial advisers often point out that this can be a problem for consumers in that it leads to a potential drop in their credit score. While this decrease could be minimal, some consumers may also be throwing away an opportunity available on older credit cards as those who want to build their credit history or keep a high level of credit available, in comparison to their overall debt, can benefit from old credit cards as a result of keeping them active even after using a debt consolidation option that comes through these balance transfer cards.
Simply put, consumers can better build their credit history if they are using a variety of debts, and when credit cards with a long credit history are used, this may be more advantageous for a particular consumer looking to boost their rating. However, it needs to be understood that consumers should focus on paying down their balance transfer credit card debt obligation primarily as some banks may only give a short period where an affordable interest rate on this card is available or may require that certain cardholders make a minimum amount of purchases on this card, which can be a problem in and of itself but will also necessitate the consumers pay down debts on a card that may already have a sizable balance.
While these credit card balance transfer options can be beneficial for some, consumers really need to factor in all of the costs that will be associated with this particular opportunity, compare them with repayment options that may not require consolidation, but if consumers find themselves with old credit cards that have been paid off thanks to this transfer option, many are still in a position to use these old cards to make affordable purchases and prompt repayments so that they can continue to improve their credit rating and history.