Is it Smart to Keep Transferring Your Credit Card Balance?

12 Sep Is it Smart to Keep Transferring Your Credit Card Balance?

Reality is that overspending happens and sometimes you can’t avoid emergencies. What do you do when you’re into debt so deep, the interest is piling up, and you feel you can’t make a dent in payments? You could take out a personal loan, but another option is to open a new credit card with a limited time 0% APR in interest fees. This usually gives you an average of a year or two to pay off your balance, interest free! Make sure to do your research on which balance transfer credit cards can save you the most money.

Why Transfer?

The most common reason is to save big on interest. Some people are carrying around cards with high APRs or multiple credit cards, and they’d like to simplify payments and save money. There are a number of reasons to transfer over your balance other than interest rates. Some reasons to transfer would be to avoid penalties, to get reward or travel points, or other benefits. You’ll immediately stop paying interest and have more time to pay down your balance. You can open a new card with a low interest rate and move your balance over from other cards or loans. Essentially, the debt on your old high-interest card is being paid by your new card.  

Breaking Down the Numbers

Let’s assume you had a credit card debt of $10,000 and your credit card is charging you 15.99% interest. With this level of debt, your monthly minimum payment would be about $232. Even if you were making twice the minimum payment, it would take you 26 months to pay off the debt and you’d wind up paying $1,867 in interest. Make sure to read the fine print, do some research, and call the credit card issuer if you have any questions in fees or payments.

How to Complete a Balance Transfer

Performing a transfer is easier than most people would think. Don’t be surprised that many cards charge 3% to 5% for a transfer fee. This is normal. You’ll still be saving money monthly. Some cards let you transfer over your balance during the application process. Regardless, you’ll need to provide information about the credit card account you’re transferring from. This includes the card issuer, the full account number, and the total amount you wish to transfer.

Paying off your balance before the 0% APR intro expires has some major perks! The payments you are making will be going completely to your balance instead of your interest. Keep in mind that some transfers take up to a week to process, so make sure to pay attention to any payments due to avoid any fees. Closing your old card isn’t highly recommended. This can be harmful to your credit, so if you are feeling tempted to keep charging, try leaving your older card at home. By removing the card from your wallet or purse, you can stick to solely paying down the balance Thinking of opening a new credit card? Bank of the Lowcountry offers several card choices, so we can help pick the right one for you!