If you find yourself buried in credit card debt you’re not alone. At the end of 2018, Americans carried nearly $420 billion dollars in credit card debt. However, simply having the debt itself is not necessarily an issue; it’s how you manage it that makes a difference. If you feel like you’re struggling to manage your credit card debt, you may want to consider a balance transfer. A balance transfer of your credit card balances is an option for debt management that allows you consolidate high interest rate credit cards into one lower rate credit card, thus saving you money on your monthly payment and simplifying your finances.
Balance transfers may be helpful if you:
- are making payments on multiple high interest rate credit cards
- can qualify for a card with a lower interest rate than your current one
- are not going to continue using the high interest card after the transfer
- want only one credit card payment to make every month
There are many balance transfer credit card options out there, so make sure you do your research before jumping on the first offer to come along. Many credit cards will offer a 0% interest rate for a short time upfront to entice you to transfer your balance, but when the introductory period is over and the regular interest rate kicks in, you may not be saving as much as you thought. Ideally, after transferring your balance, it’s best to pay off the total amount during the low or 0% interest rate introductory period. That way, you accrue as little in interest charges as possible. Additionally, to successfully get control over your credit card debt, you must stop using your high interest rate credit cards. If you continue to use these cards after your balance transfer, you will be back in the place you’re in now, struggling to pay down your debt.
Balance transfers may not be helpful if:
- the regular interest rate after the introductory period is higher than what you’re currently paying
- you continue using your high interest rate credit cards to make purchases
- you still cannot afford to make your monthly payment after transferring balances
Using a balance transfer to manage your credit card debt is an excellent option for many people. But do your homework and choose the transfer offer carefully to avoid hurting your credit score. For instance, you don’t want to max out the new card with your transfer. Instead, choose one with a higher credit limit than the amount you want to transfer. To improve or maintain a good credit score, keep your credit utilization ratio under 30%. If you have questions about balance transfers, speak to one of the financial advisors at your credit union.
