If you are in over your head with credit card debt, it is easy to feel stuck. Specifically, if your credit card has a high interest rate, it can be difficult to make progress paying it down. If you are struggling to pay off your debt, one option is to consider a balance transfer. Balance transfers involve moving your outstanding debt from your credit card to a new one—usually one with a low introductory interest rate.
Balance transfers are commonly used by consumers to pay off their debts at a lower interest rate and with better benefits than their current credit card. With thorough research, consumers can benefit from balance transfer incentives and reduce the interest rate on their debt. However, it is important to read the fine print, as many balance transfer cards come with conditions. If you are considering a balance transfer, here are some things to consider.
What is a Balance Transfer?
Balance transfers allow consumers to transfer their current credit card balance to a new credit card. Often, credit card companies waive balance transfer fees and offer low introductory interest rates to entice cardholders. This promotional period usually lasts for six months to a year and is usually set at an interest rate of 0 annual percentage rate (APR). At first glance, balance transfers are a no brainer for consumers with a lot of debt. However, there are many conditions in the fine print.
Using a Balance Transfer to Pay Off Your Credit Card Debt
When done correctly, using balance transfers to pay off debt can be an effective strategy. If you’ve accumulated debt on a credit card with a high APR, a balance transfer to a card with a significantly lower interest rate means you will be able to focus on paying off principal instead of solely making interest payments. This can save you from paying a significant amount of interest. Here are some important things to aim for when looking for a balance transfer credit card:
- Find a new credit card with a very low-interest rate, ideally 0 percent APR
- Look for a credit card without a balance transfer fee
- Be sure the new credit card can accommodate your previous balance
- Consider if you can pay off your debt during the introductory period before the interest rate increases
It is imperative to understand the terms of a balance transfer deal. After thoroughly researching available deals and understanding the terms of the fine print, you can assess whether a balance transfer card is the best strategy for paying off your debts.
The Drawbacks of Balance Transfers
Many people get excited about using balance transfers as a way to pay off their debts; they jump into balance transfer deals without considering potential pitfalls. While balance transfers are a viable way to pay off debt, they often come with specific details and conditions that you must follow to keep the promotional benefits.
When you transfer your debt to a new credit card, many credit card companies will require that you make the minimum monthly payment to keep the low introductory interest rate. Therefore, if you are considering a balance transfer, you must be ready to maintain a monthly balance and make on-time payments.
There are pricy penalties that come with failing to meet the conditions of the balance transfer. For example, if you fail to make a monthly payment after the transfer, the credit card company will drop the low-interest rate and institute one that is often higher than that of your previous card. Similarly, failure to follow any of the rules in the cardholder agreement—including exceeding the credit limit or bouncing a check—can have expensive consequences.
Another important consideration is the regular interest rate on the new card. Often, the low promotional interest rate is only valid for six months to a year. After the promotional period ends, the regular interest rate of the card will kick in. If you don’t think you can pay off your debts within the promotional period, it is important to consider what the interest rate will be when the low rate ends.
Consult With a Skilled Credit Card Debt Settlement Lawyer
Many people struggle to get on top of their credit card debt. At McCarthy Law, we understand the overwhelming burden of credit card debt and are committed to helping our clients end the cycle of expensive interest payments. When you consult with our experienced team, we will help you explore the best options for getting on top of your finances. To schedule a consultation with a knowledgeable and experienced debt settlement paralegal, call our office at (855) 976-5777 or fill out an online contact form today.