Posted on: Sep. 23, 2017 in Credit

When you’re unable to pay your credit card balance off at the end of the month, you’ll begin to accrue interest charges on the amount you owe. How much depends upon your agreement with the card issuer but, regardless of what your interest rate is, the balance you owe can climb if you’re not careful. Interest charges, combined with additional spending, can leave you deep in a hole you can’t easily climb from. If this is where you are, a balance transfer may help.


If you have access to a credit card that doesn’t carry a balance or has a low one, look to see if you are eligible for a zero- or low-interest balance transfer offer. If you don’t have any available credit, consider opening a new one. By moving money from your higher interest cards to one with a lower interest rate, you’ll save money and pay off the debt quicker.

There are pros and cons to opening a new credit card. First, when banks look to your credit report to consider your application, this can bring down your score slightly for a period. However, if you are approved for a new line of credit, your overall debt-to-available-credit ratio can improve, causing your score to go up. Either way, if this helps you eliminate debt, you may find that any temporary hits to your credit score are worth it.

Be sure to read the fine print on any balance transfer offer. You must understand the cardholder agreement so you don’t get burned by misunderstanding. Here are a few things to look out for.

Introductory interest rate: To entice you into moving your balance, credit card companies may offer a lower interest rate for a period, possibly even 0%. Not paying interest on the balance you transfer (presumably from a high interest rate card) is what makes this an attractive option.

Ongoing Annual Percentage Rate (APR): Pay attention to the amount the company will charge you if you fail to pay off the balance before the introductory rate expires. If it’s worse than what you had before, you may want to reconsider or, at the very least, make sure you pay that balance off in time.

Balance transfer fee: This is often a fixed dollar amount or a percentage of the amount you transfer. You may have to pay this amount in full on your first monthly bill. You’ll need to know when and how this amount is due so you can plan accordingly. If the fee is too high, a balance transfer may not be the best move.

Minimum monthly payment: This is usually a percentage of the total outstanding balance, plus any other fees. If the minimum due is more than your old card, or more than you can handle, don’t open the new card.

Once you decide to move ahead with a balance transfer, avoid using your cards to charge additional items. You may have new credit available, but continuing to use more credit than you can afford will only make you deeper in debt. Also, if you fail to make a payment on time, your introductory rate may no longer be available. It’s important to use this time to really tackle the debt, pay on time, and set yourself up to be free of the balance before the introductory offer expires.

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