Do a Credit Card Balance Transfer and Save

Do you have a credit card or multiple cards that have outstanding balances? If you are like many cardholders, your minimum monthly payment is made up of just the interest that you owe on your account and their balances have “gotten out of hand”.  This sometimes happens when you hit a financial rough spot and use your credit cards as a crutch to get you through until better times.  With many cards, if you are a day or two late with your monthly payment, the interest rate is adjusted to a new, higher default rate that makes it even harder to get the balance paid off in full.  You can do a balance transfer and save big on your overall debt.

How it Works

Transferring a balance from your existing credit card to a new card is easy and simple.  You will locate a balance transfer offer that appeals to you.  Once you have been approved for the offer, you can do a balance transfer – usually over the phone with the company, or using “checks” that are issued in the welcome package that you receive when you become a cardholder.  Your old balance(s) is transferred to the new card and you will pay the new card issuer each month in lieu of your existing credit card company.  You can usually transfer the balance from one or more credit cards, department store cards, or even small bank loans (depending on the parameters that have been set by the new car issuer).

Things to Look For

While doing a balance transfer to a new card with a lower rate of interest can be a good way to finally get out of debt for good, there are some pitfalls to watch for because not all offers are created equally.  While the lower interest rate is an obvious note on your shopping list for a new card, shoot for a credit card to transfer your existing balances to that:

  • Doesn’t charge you an annual fee.  Any savings that you might have seen from doing the transfer might be negated by paying a steep annual fee.  In general, avoid offers that charge an annual fee altogether, no matter how enticingly they are advertised.
  • Charges a very minimal amount or nothing at all to do the transfer in the first place.  You don’t want to pay an exorbitant fee for transferring your balance from one card to another.

Has an extended “introductory period”.  Sometimes those offers of zero percent balance transfers are only good for a limited time, like six months.  After that period, your APR may be jacked up to a rate that is higher than you are paying now.  Look for a low introductory APR that is good for a year – this will give you time to pay off a bulk of your credit card debt before being charged a higher rate.   (Some folks may even go looking for a new “new” card when the low APR period is about to expire – and that’s perfectly legal and could be a smart move).

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