Do you have lots of credit card debt, and at high interest rates? Transferring it to a Balance Transfer Card may be a fantastic option for you. Some of these even give you a 0% introductory rate for a year or more. This can speed up your day of debt freedom and save you $$ on interest. But before you take the plunge, there are a few things that you should know
The basics of a balance transfer cards
With these types of cards, you are changing your creditor and terms. You can get a significant reduction in your interest rate on the new card. In the best case, you will have a 0% APR for as much time as it will take you to get out of debt. There are usually a number of companies that will offer balance transfer deals.
The five things to know about balance transfer cards
1). You will need a strong credit score to be approved
Your credit score is your trustworthiness measurement. If it’s low, companies will be reluctant to take the chance on granting you a balance transfer card. You should have a minimum score of 700 before you consider this option. If your score is above 750, you will qualify for a good quality balance transfer.
Make sure to find out your credit score from the three major credit agencies before you begin the process.
You can learn how to get your free credit score and boost your credit here.
2). This can make you debt free faster
When paying monthly minimums on credit cards, you are pretty much just paying the interest. If you can eliminate the interest, even for 18 months, those monthly payments reduce the balance. That’s a heck of a lot better. So by transferring your expensive balance to a less expensive transfer card, you will make faster progress towards resolving your debt.
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3). Keep that old credit card open – but don’t use it much
By closing down an older card, you hurt your credit score. Credit reporters give you more points based on how long you have had credit. So keep that old card, especially if it’s more than four years old. Just don’t start using it too much, and don’t create the problem again. Save it for emergencies and low expense items that you can pay in full each month.
4). There is often a fee for opening a balance transfer card
The new company granting you the balance transfer card may charge a fee for opening this account. It can be anywhere from 3% to 5% of your amount. Again, be sure that the new interest rate, whether it be an introductory rate or a permanent rate, will save you money.
5). Beware the expiration of the original introductory rate
Especially if you’re getting a 0% APR, it is important to know how long that lasts and what happens afterwards. You also must know how much balance you need to pay down, and how long it will take you. If you have 12 months at 0% APR, but then it jumps up to 25%, make sure that your debt is not too large for you to cover (at least most of it) in those 12 months. Otherwise, you may find yourself spending even more than before.
So is a balance transfer card a smart decision for you?
If you qualify, and you are confident you can pay down most of the debt within the timeframe of the introductory rate, a balance transfer card can be a brilliant solution. Like anything else, there are good ones and less good ones. Look around for the best offer and do your math to make sure it works. There are other ways and offers for free debt information and advice available on Get Me Out of Debt.com.