Balance Transfer Credit Cards: A Guide to Managing Debt
If you’re carrying high-interest credit card debt, a balance transfer credit card may be able to help. By transferring your balance from one or more cards to a new card with a lower interest rate, you can potentially save hundreds or even thousands of dollars in interest charges.
But not all balance transfer cards are created equal. Here’s what you need to know before applying:
1. Look for a long introductory period.
The longer the introductory period, the more time you’ll have to pay off your balance without accruing additional interest charges. Many cards offer 0% APR for 12-18 months.
2. Check the balance transfer fee.
Most cards charge a fee for transferring your balance, typically around 3-5% of the amount transferred. Make sure the fee is outweighed by the potential savings on interest charges.
3. Consider other fees and rewards.
Balance transfer cards may also come with annual fees, late payment fees, and foreign transaction fees. On the flip side, some offer cashback rewards or other perks that could be beneficial if used responsibly.
4. Don’t forget about your credit score.
To qualify for most balance transfer cards with favorable terms and conditions, you’ll typically need good to excellent credit (a FICO score of 700+). Applying for multiple new accounts at once can also temporarily lower your score.
5. Have a plan in place.
A balance transfer card can be a helpful tool in managing debt but it’s not a magic solution on its own. Be realistic about how much you can afford to pay each month and make sure you have a plan in place to tackle the remaining debt before the intro period ends.
In summary, if used wisely, a balance transfer credit card can help save money on high-interest debt while providing breathing room to get finances back in order—but only if used responsibly and with discipline towards paying off debt.