Using a Balance Transfer To Pay Off Credit Card Debt
Published by admin on March 17, 2010
Using a Balance Transfer To Pay Off Credit Card Debt
Virtually every financial planner in the world will tell you the absolute key to successfully dealing with credit card debt is to reduce the interest you are paying. The high interest rate charged by credit card companies makes it nearly impossible to pay them off. There are a variety of ways that you can get the amount of interest that you have to pay reduced, most of them involve borrowing money from somewhere else. One of the easiest and most effective ways to lower your interest rate is through a balance transfer.
You have almost certainly seen the advertisements for low interest balance transfers offered by the credit card companies. These are normally for a short introductory period in order to lure in new customers, even so it is often a good idea to take advantage of these offers. Even if you can only reduce your interest payment for a short time it can still make a huge difference to your overall credit card debt.
If you get a card with a low introductory rate that lasts for only the first year this can still give you a great opportunity to get your credit card debt under control. Because interest is accruing at a much slower rate you are paying off much more of the principal with each payment. The key here is to pay as much as you possibly can so that you get as much debt paid off before the interest rate goes up. This isn’t going to work if you are just making the minimum payment every month. You need to substantially reduce the principal that you owe, so that when the interest rate goes up you don’t find yourself with just paying the interest each month. If you are just paying the minimums you are pretty much just paying interest, this won’t get you out of debt. You need to make hay while the sun is shining.
One thing that you need to keep in mind if you are considering a balance transfer is that you have to be aware of what the interest rate is after the introductory period. If the regular interest rate is even higher than what you were paying before it probably isn’t worthwhile to transfer your balance, unless you are sure that you can pay it off before the rate goes up. You may be thinking no problem, I’ll just transfer to a new card when the interest rate goes up, think again. The credit card companies have figured that one out, if you try to transfer to a new card within the first twelve months they will apply the full interest rate retroactively. Don’t get caught by this one, read the fine print on your card holder agreement.
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