This is a guest post by Jeff Weber
Consumers have taken advantage of balance transfer offers for years. The opportunity to move high interest credit card balances to an account with more favorable terms can save hundreds or even thousands of dollars. The same concept can be used by business owners looking to manage their credit card debt. Small business owners in particular are susceptible to credit card debt as in many cases this is the first source of funding for business expenses.
Banks are not always willing to work with a start-up or untested business, therefore many entrepreneurs find themselves using their credit cards to pay for business expenses. Doing so can quickly result in a balance which even a successful small business is unable to pay off in full. Debt can destroy a business just as quickly, if not more so than an individual’s personal finances. For this reason, all credit card users would benefit by learning how to lower debt balances with balance transfer offers.
Trading Debt for Debt
How does moving the debt on one card to another help you eliminate your debt faster? The same way a consolidation loan can help you reduce your debt quicker. By moving your balance to an account with lower interest rates and more favorable conditions, more of your payment will be applied to the principal, thus reducing you debt faster. To be successful using this strategy, you must take the time to crunch the numbers to make sure your new account offers a significant savings.
To gain the maximum benefit from balance transfer offers you must first understand the basic principles of credit card management. High interest rates result in higher monthly interest charges. It is the addition of high interest charges to an existing balance which makes it difficult for credit card users to pay off high balances. Keep in mind that transferring balances generally comes at a cost, to include balance transfer fees, account set-up fees, annual fees and any of the other fees typically associated with a credit card account. The fees and interest rates will vary from offer to offer, therefore careful consideration must be given to each before deciding if this is the right move for your business.
Drawbacks of Moving Debt Balances
When done correctly, accepting a balance transfer offer that provides better terms and conditions over your current account can certainly help eliminate debt faster. As with most matters concerning money, there are potential drawbacks to this strategy. Individuals who transfer high interest debt to a new, lower interest account must avoid incurring debt on the old high interest account. The purpose of moving your balance to a new account is to gain the benefits of a lower interest rate. Unfortunately, some credit card users have been known to transfer the balance to a new account, only to turn around and rack up new charges on the older account. This of course defeats the purpose of a balance transfer offer in that the user has effectively doubled their debt.
Business owners who are looking to reduce interest charges and take control of their credit card debt may find their solution in balance transfer offers, as long as they are not trading in one problem for another.
Jeff Weber writes about saving money with balance transfer credit cards at SmartBalanceTransfers.com, a website designed to educate consumers about the benefits of using a 0% APR balance transfer to reduce debt expenses.