Like a lot of people these days, you may have a lot of credit card debt. How you got into his position is not the focus of this article. We are discussing a certain way you may use to dig yourself out.
Luckily, there exists a great solution to this problem: balance transfer cards. What is a balance transfer? Well, a balance transfer is simply the act of transferring an existing credit balance to another credit card.
Most credit cards aren’t good for this type of use. For one, they may immediately start charging interest on the transferred balance, plus a fee, generally about 3-5% of the transferred balance.
However, there is a specific subset of credit cards, called balance transfer cards, that won’t immediately start charging interest. Instead of giving a 15-21 month window of 0% APR to pay off your balance interest-free.
Let’s walk through the steps you’ll need to take to get one:
Step 1: Before doing anything, make a debt repayment plan and rank your credit cards by interest rate. No matter what you end up doing, you’ll always want to tackle the highest interest rate debt first.
Step 2: Once that’s done, call your credit card company and try to get them to lower your APR. Emphasize that if they don’t agree, you’ll move your balance to another company offering lower rates.
Step 3: If the call fails and you still want to transfer, keep in mind these three key factors.
- You’ll need good credit to get a balance card.
- You can’t transfer a balance to a card offered by your current bank.
- Depending of how large your debt is, you may not be able to pay it off by the promotional period end date, so have a plan for that.
The credit line on your balance transfer card may be below your total debt load, meaning you’ll either have to: Apply for a second balance transfer card. Keep the remaining debt on your current card and pay the high rate.
Or use a personal loan, which is slightly more expensive than a balance transfer card, but comes with a lower credit score requirement.
Let’s assume for now you have been approved for a balance transfer card with a high enough credit limit. This is an important first step, but they’re still a few more things to keep in mind:
One: Don’t spend on the card, as the 0%APR period may not extend to purchases.
Two: Complete the transfer as fast as possible the 0% APR offer may expire.
Three: Be careful about consolidating multiple balances onto one card, as that will lower your credit score.
Four: Once you’ve completed the transfer, always pay on time and don’t close out your old accounts, as failing to follow either will lower your credit score.
Hopefully, you now have a better understanding of balance transfer cards.