Home Debt When a Credit Card Balance Transfer Might Make Good Financial Sense

When a Credit Card Balance Transfer Might Make Good Financial Sense

by My Journey to Millions

piggy bankAre you carrying credit card debt? If so, you’re most likely paying astronomical interest rates that can make it hard to shuck off that debt and work toward your other financial goals. But what if there was a way to pay off your credit card debt without paying those high interest fees?

There is — it’s called a credit card balance transfer. Balance transfer credit cards typically offer interest rates as low as zero percent for an introductory period, giving you six months or more to work on paying off your credit card debt interest-free. If you can manage to pay off your debt within the allotted time frame, you could save hundreds of dollars in interest. Just make sure you use this financial tool wisely by reading the fine print, choosing a card carefully, and committing to taking full advantage of your interest-free period.

Choose the Right Balance Transfer Credit Card

There are many balance transfer credit cards available on the market, so make sure you shop around to pick the right card for your financial needs. Balance transfers aren’t free, so read the fine print to make sure you’re not going to end up saddling yourself with even more debt. Some important things to know include:

  • What’s the introductory interest rate?
  • How long is the introductory period?
  • Is there zero interest on balance transfers, or deferred interest?
  • What’s the minimum monthly payment on the balance transfer card?
  • How much will the balance transfer cost you?

Federal law dictates that card issuers must offer the introductory rate on balance transfer cards for a minimum of six months, but it shouldn’t be difficult to find a card with a longer introductory rate. You should be able to find a balance transfer card offering introductory rates for as long as 18 months. The longer your introductory period, the more money you save on interest.

Ideally, you want to be able to pay off your entire balance within the introductory period. If you think you might not be able to, choose a card with zero interest during the introductory period, rather than a deferred-interest card. Cards with deferred interest accrue interest during the introductory period, but you don’t have to pay it until the introductory period ends. If you pay off the entire balance transfer by the end of the introductory period, there will be no interest — but if you don’t, you haven’t saved any money at all.

You should also pay attention to how much your balance transfer will cost. They aren’t free; you’ll pay about three percent on average. That’s a lot of money, especially if you’re carrying four or five figures of debt. Figure out how much you’ll save on interest over the introductory period to determine whether you’re truly coming out ahead.

Make Your Balance Transfer Count

Piggy bankA balance transfer credit card can be a useful financial tool to help you escape credit card debt much faster, as long as you make it count. If you’re transferring multiple credit card balances onto the same card, you’ll have a little more leeway in your budget right away. Use that money to pay off your credit card debt faster. Remember, your goal is to pay off as much of your debt as possible without paying interest, so the more you can afford to pay each month, the better off you’ll be when the introductory period ends.

Opening a new balance transfer credit card can also be an opportunity to take advantage of credit card perks. Look for a card that offers travel or other rewards points for balance transfers.

Credit card debt can often feel overwhelming, especially if you have a lot of it. But you don’t have to carry credit card debt forever. With a balance transfer credit card, you can get the chance to pay off your credit card debt without paying sky-high interest rates. Look for a card that offers zero interest for a longer introductory period, and aim to pay off your entire balance — or as much of it as you can — while your interest rate is nonexistent. With some planning and discipline, a balance transfer credit card can help you make credit card debt a thing of the past.


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