If you have credit cards with high balances, acquiring another card is probably the last thing on your mind. Although it may seem like you’d be digging a deeper hole of debt, you can actually take control of your finances by opening the right type of credit account. Finance Globe told us, “A balance transfer card is one option that will allow you to effectively decrease the amount of money you owe.”
How a Balance Transfer Saves Money
Every time you pay interest on borrowed funds, you’re essentially wasting money. Even when you shell out a little extra on the monthly payments, a high interest rate can make you feel as if you’re running in place and never making any progress. If you regularly use the card and maintain a near-maximum balance, you could end up spending hundreds of dollars on interest each year.
Once you’re stuck in that endless credit loop, it may take years to pay off your debt. This is why balance transfers are ideal. With one simple transaction, you can move your debt to a card that temporarily charges no interest or offers a lower rate. This will free up some cash each month for you to put toward your total debt and ultimately pay it off more quickly.
What to Look For in Your New Card
Not all offers are equal, so do some research before you jump into the transfer pool. The initial interest rate will increase at some point, and it’s typically within a year. Look for a card offering the lowest introductory APR for the longest period possible. This is especially important with larger balances. It’s also a good idea to choose a card that doesn’t charge additional fees for late payments or membership.
After the intro period ends, you’ll be charged the regular rate on any remaining balance. Factor that in when comparing cards. Another comparison point is the transfer fee. This is typically between 3 and 5 percent of the amount being moved, but some companies waive the fee altogether. If you want to determine whether or not the additional fees are worth the effort, you can use the balance transfer calculator here.
How to Make the Best of a Transfer
Transferring balances from your high-interest credit cards will only be beneficial if you’re sensible about reducing your debt. Pay attention to APRs, including the rates for transactions on your new card. If you have several cards open, transfer the ones with the highest rates and balances. You may even be able to completely wipe out more than one card with one transfer.
When making the new payments, don’t just stick with the minimum requirements. Tally the months in the promotional phase and the total amount owed, and come up with a monthly figure that will significantly shrink the balance during that time. Decide where you can cut costs in your budget so that you can put as much money as possible toward your debt. Some tips for evaluating your finances can be found here.
Whether you need some help keeping track of your debt or you’re drowning in credit card bills, doing a balance transfer will provide relief. Transferring one or more high-interest accounts to one easy-to-manage card with a lower rate just makes sense. If you take advantage of the savings and apply any extra money to the total, you’ll see a substantial difference at the end of the promotional period. With the right card and the right attitude, you can be on your way to a debt-free life.
