These days, credit card debt is increasing like never before. This can create an array of problems, including high-interest payments and skyrocketing customer debt. In the long run, this can hurt a consumer’s credit history and make it impossible for them to pay off their debt. Fortunately, there are actions someone can take to get out of credit card debt. One such example is a credit card balance transfer.
What is a Credit Card Balance Transfer?
A balance transfer is when you take the amount of money you owe on one card and transfer it to another card, or a series of cards. There are many reasons you would do this. Usually, when you make a balance transfer, you can reduce your interest. For example, many credit cards have deals where you can pay off your debt, interest-free, over a certain period. As such, a balance transfer can be hugely effective at saving hundreds, if not thousands, in interest costs. Instead of paying off interest, you can pay down principal, ultimately enabling you to get out of debt faster.
How Do Credit Card Balance Transfers Work?
Let’s say you owe $5,000 on a credit card and are struggling to make the minimum payments due to the high-interest rate. Another credit card that you have may offer you a reduced interest rate if you transfer your credit debt to that company. You would have to connect with that company and apply for the transfer. Once that is done, you would likely be able to save money by making cheaper payments.
You can transfer a balance in two ways: by either moving it to one of your existing cards or opening a new credit card and transferring the balance there. You would still owe all of your debt, of course. All that would change would be the terms under which you repaid the principle of that debt.
Keep in mind, just because you see an offer doesn’t mean you will automatically qualify. Most credit companies have basic requirements that an applicant must meet when they apply for a credit card. These are typically minimum scores of debt levels. Furthermore, if you have taken advantage of a credit card special with a company in the recent past, you may not be able to take advantage of another one. It is usually better to call a company beforehand and check to see if you meet the minimum requirements.
If you qualify, your balance should be approved. From there, you would follow the payment terms as laid out by the company in question.
When Should You Do It?
That decision is entirely up to you. There may be instances where you can save a huge amount of money on a credit card balance transfer, and that it may be well worth it to open a new card. However, every time you open a new card, you may ding your credit score; this is what happens when a company checks your creditworthiness before determining whether or not to give you a new card.
Timing may also be important. Many credit card companies will periodically offer specials in which they will give you more time to pay for a balance transfer debt at an interest-free rate, or they will give you a lower overall interest rate.
Remember, the best reason to have a balance transfer is to lower your interest and thus lower the total you pay. If you can do that, it’s probably worth it.
Where Can I Find Credit Card Balance Transfer Opportunities?
There are many potential ways. Of course, there is always the internet, and googling “credit card balance transfer” is bound to yield good results. You can also check with your local credit union for a credit union credit card. These hometown companies often have great deals that have a tendency to be overlooked. Last, make sure to call up your credit company and see what sort of offers they may have on transferring a balance from one card to another. You may be able to transfer a balance at a more reasonable interest rate.