At one point or another, most people who have a credit card, have not been thrilled by their statement. Once you start seeing higher balances, you become aware of the long-term cost of credit card debt if it’s not paid off each month. You could make the minimum payment each month on a credit card, but it will take months or years to pay off each credit card. The cost of credit may exceed the benefits unless you pay more than the minimum payment whenever possible. A balance transfer can help manage outstanding balances. So, What is a Balance Transfer, and Should I Do One?
What is a balance transfer?
A balance transfer is very simple. In a balance transfer, a person transfers their outstanding balance from one credit card to another. So, why would someone want to do this? Well, if a different credit card company offers a lower interest rate then the current one being paid, you can save money when paying off the balance if it is transferred to the lower interest rate account. Some companies offer other perks or benefits along with balance transfers too.
Should I do one?
Over time, it’s easy to get caught in a cycle of revolving credit card debt. In order to pay down debt, you need an easy way to pay less interest, which will reduce your total debt. If you find a credit card offer with a balance transfer including zero percent interest for a limited time or a lower interest rate than your existing credit card, then you should consider transferring the balance. It makes sense to move your debt from a creditor with a higher interest rate to a creditor with a lower interest rate. If you move the balances around over time, you should expect to pay less for credit and reduce your overall debt.
How does it work?
When you find a balance transfer offer, there is the option to move multiple balances over to the new card. With a lower APR, you save money on every credit card with a higher interest rate. Keep in mind that a balance transfer offer such as 0% APR could be for a limited time, such as 6 months or 12 months, and then the interest rate goes up.
What are the steps?
These are the basic steps to completing the process:
- Pick a balance transfer card with an acceptable interest rate.
- Apply online, on a mobile app, or by paper application (via return mail) for the balance transfer credit card.
- Wait for your approval.
- Once you get approved for a new credit card, call up the provider and complete the balance transfer.
- Start making higher payments on the new credit card before the introductory offer expires.
Other considerations are how long the introductory period is, what kind of rewards are offered, and how much you can transfer to the new card. Also, you will need the account number and the balance information for each credit card that you want to transfer to the new card.
If you can save money and consolidate your outstanding credit card debt it is definitely worth considering. Absolutely, make sure that you will be paying a lower rate on the account you are transferring to. Choose a provider with a high rating for customer satisfaction and conveniently accessible online and mobile applications. Balance transfers help you become debt-free over time.
If you have crunched the numbers and you still won’t be able to pay off your debt you might want to seek help from a company like Freedom Debt Relief.