A balance transfer VISA Credit Card may be able to offer a little debt relief when you’ve found your interest payments have gotten out of control. It’s a simple concept that can be the best solution for many in an effort to pay down high-interest Credit Card debt. If your credit rating is good, the process can be quick and easy. Basically, you apply for a Credit Card with a much lower interest rate than your current card and then transfer the balance from your old card or cards to your new card. Moving multiple Credit Card balances to one lower interest card can also eliminate the stress of making multiple payments each month.
Although you’re robbing Peter to pay Paul, your goal is getting a lower interest rate in the process. Simple, right? In fact, you may be able to find a special 0% APR* intro rate that is valid for a limited time. It’s important to remember that 0% balance transfer rates are for a limited time only. You’ll need to consider the rate after this special intro period. Be smart about balance transfers and take all of these other factors into consideration when searching for the right card.
Four Things to Consider When Choosing a Balance Transfer VISA Credit Card
- Interest rate – How much lower is the interest rate on the new card compared to your existing card or cards? If you’ve been able to find a 0% introductory rate card or a very low teaser rate, you’ve obviously scored a win. What is the interest rate of the card you are applying for after the intro rate expires? That is an important question. After all, you don’t want to eventually end up with an even higher rate than you are now paying.
- Length of low-interest rate promotional period – Don’t let the 0% interest rate or other low teaser rates fool you. Read the fine print, as these offers are for a limited time only. Some may only offer that rate for the first 60 or 90 days; some for a bit longer. Can you pay off the balances you are transferring during the special interest period? If you don’t feel you can pay off the entire balance in that time, what interest rate will the remaining balance convert to? How does that Credit Card interest rate compare to the rate you are currently paying? When transferring the balance of higher interest cards, the goal is to pay off the balance before the special APR* period ends.
- Costs involved – What costs are involved in the credit card balance transfer. There are typically some costs involved that can range to a pre-set dollar amount fee for each balance transfer to a percentage of the balance moved, and possibly an annual fee or other fees. Certain fees are to be expected, but you want to be sure they are not excessive. Is the amount you are saving in interest significantly higher than all fees involved? Do the math. If the cost involved with the Credit Card balance transfer outweighs the savings, a particular card or balance transfer, in general, may not be the right answer for your needs.
- Credit limit – What is the credit limit of the new card? If that credit limit does not cover the amount you want to transfer, what’s the point?
Create Better Habits & Stop Charging
Paying off debt quickly and completely should be the number one goal of a balance transfer. Once you’ve applied for and gotten your lower interest Credit Card, transfer the balances of those higher interest cards immediately. Then get started on paying off the balance of the new card. It’s essential to budget and have a plan upfront as to how you can pay off all of your debt during the special rate period. This means making more than just the minimum payment due. Credit Card Companies like you to carry that balance because it makes them more money in the long run. Don’t get lured in by that minimum payment! The mistake most dangerous to one’s financial health when transferring the balance of higher interest Credit Cards to a lower interest card is continuing to charge up debt. This is especially true if the end goal is to eradicate debt, which it should be. You don’t want to find yourself paying higher interest rates on two cards because you didn’t pay off your debt during the special rate period, and worse yet, you continued to charge!
What’s the answer? Tighten your belt, do without a few of those luxuries and don’t use those paid-off Credit Cards until your debt-free and feel you can be more responsible with your spending. Falling back into your old charging habits is only going to hurt you in the long run and prolong your debt.
Once you’ve paid off the balances of several Credit Cards with a balance transfer, review your credit report to ensure the accounts are reported as paid in full. You don’t want mistakes made that show you carrying much more debt than is actually the case. You want to be sure that zero balances are shown as just that. If you find mistakes, report them immediately, so they are corrected quickly.
Finally, although many Credit Cards may allow you to transfer balances from other cards, this method of paying down or consolidating debt only makes sense if you’re saving money through a much lower interest rate.