Ever felt like you’re just paying off the interest on your credit card and not making a dent in the actual debt? That’s where balance transfer can help.
Balance transfers on credit cards allow you to move your debt from one card with a high interest rate, to another card that offers you a lower interest rate. Some even offer a 0% interest rate for a starter period, like 12 or 18 months, which can be a big money saver.
Now, before you get too excited, keep in mind there’s usually a fee for doing this – about 3% of whatever amount you transfer. So, if you’re transferring a $5,000 balance, you’d pay around $150. But, consider this: if that $5,000 was sitting on a card charging you 20% interest, you’d be shelling out a lot more in interest over those 18 months.
Here’s how it breaks down: normally, that $5,000 would have racked up about $1,500 in interest alone over 18 months. By switching to a card with a 0% intro rate (even after factoring in the transfer fee), you save a chunk of change and get some breathing room to pay down the debt without the interest monster eating up your payments.
The trick is to make the most of this interest-free or low-interest period. Aim to pay off as much of that balance as you can before the promo period ends because once it does, the interest rate will likely jump up, though it’ll probably still be less than what you were dealing with before.
So, in a nutshell, a balance transfer can be a smart move if you’re struggling with high-interest credit card debt. Just make sure you do the math and plan to pay down as much as you can.
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