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Should I make a credit card balance transfer?

With the holidays now months behind us, you may find yourself with overwhelming credit card debt. Rest assured, there are ways to climb out of debt and into a better financial position.

A balance transfer allows you to shift your high-interest debt to a credit card that offers a lower interest rate or even zero interest during a promotional period, typically ranging from 6 to 24 months.

Transferring some or all of your credit card debt to one that includes a lower rate, an introductory interest-free period, or both can help you move toward a debt-free life; however, there are some things to be aware of. Consider these pros and cons:


1. Interest-free debt.

Your biggest push for making a balance transfer is to get a break from the interest that’s added to your balance. Making a balance transfer will allow you to take a bite out of your debt and make progress toward getting rid of it completely.

Look for cards that offer a 0% APR as an introductory offer for balance transfers. This can help you save significantly on interest charges and pay down your debt faster. You’ll want to develop a payment plan to maximize the benefits of the introductory rate and to pay off as much of the balance as possible before the rate increases to the standard APR.

Consider this scenario: You have a $5,000 balance on a 24% APR credit card and you make a $250 payment. Upon making a monthly payment of $250, you might find that close to $100 is chewed up by interest alone, barely making a dent in the original $5,000 debt. Transferring this balance to a 0% APR credit card allows the entire payment to reduce the principal, ultimately helping you to clear the debt more swiftly and cost-effectively.

2. Convenience.

The more monthly bills you need to pay, the greater the chance of missing a payment. A balance transfer lets you consolidate the balance on several different cards into one, decreasing the number of monthly payments you need to make.

3. Motivation.

Making this important move towards reducing your debt can inspire more mindful spending behaviors.


1. High interest fees.

After a set period of time with your new card, you might face exceptionally high interest rates. Before you make a balance transfer, be sure to check how long the introductory rate lasts and what the interest rate will be after the promotion ends. While you may plan on paying down your balance before the interest rate kicks in, you may not be able to do so.

You’ll also want to evaluate the rate details in the event of a late payment or for purchases made on your new card. Many balance transfer cards do not offer the same interest-free deal for new purchases and if you miss a payment, you may lose your introductory APR and be hit with a higher rate of interest.

2. Transfer fees.

Most balance transfer offers charge a minimum of 3-5% of the balance you’re transferring. So, while you may not be incurring interest, the transfer isn’t always free. Be sure to check the fine print regarding the balance transfer fee or other transaction fees.

Balance transfer fees can vary and add significantly to your overall debt. You’ll want to calculate whether the money you save on interest will outweigh this fee before making the transfer.

3. You need excellent credit.

If you’re considering a transfer, know that you often need to have a credit score of 700 or greater. Also, you’ll want to verify that the credit limit on the new card can accommodate the balance you want to transfer. It's important that the credit limit is significantly higher than your balance to avoid potential negative impacts on your credit score due to high credit utilization.

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4. Increased monthly bills.

Sometimes, financial institutions may only accept a portion of interest-free balance transfers, leading to additional monthly bills to track. This increases your chances of missing a payment. If your entire balance can’t be transferred, give priority to your interest-free payment, but don’t neglect other bills.

Tips for successful balance transfers.

  1. Evaluate interest rates at various financial institutions.
  2. Understand the introductory period and the rates following this period.
  3. Understand the fees involved.
  4. Assess the credit limit.
  5. Set up a budget and plan your payments.
  6. Do not use the card for new purchases.
  7. Ensure that you make all payments on time.
  8. Keep old cards open to avoid hurting your credit score as it affects your credit utilization ratio.
  9. Pay more than the minimum each month to reduce your principal balance faster and save on interest.
  10. Monitor your balances, interest rates, and terms to adjust your repayment plan as needed.
  11. Consult a certified credit counselor to help explore your options and determine if a balance transfer is the right strategy for you.

If you’re sinking in credit card debt, a balance transfer to our Visa® Platinum credit card might be a solid first step toward your financial freedom. Discover more about our competitive rates and options by calling, visiting our website, or stopping by today.

All information presented on this page is for educational purposes only and doesn’t constitute tax, legal, or accounting advice. It is to be considered as general information, not recommendations. Please consult with an attorney or tax professional for guidance.
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