Should You Transfer Your Balances?

I have a love/hate relationship with balance transfers. They have been both detrimental, and helpful to my debt payoff journey. Are you thinking about taking advantage of a balance transfer offer? Let's discuss the pros and cons...


Balance Transfer Pros


Can lower or eliminate interest rates. Generally, a balance transfer offer will come with a significantly lower interest rate. I've seen many offers between 0%-3% APR, which is a lot lower than the average credit card APR (usually in the 20% range).


Can consolidate multiple cards into one payment. If you have enough available credit, many credit card companies will allow you to transfer several balances as part of the balance transfer offer, essentially consolidating your debt. This can be extremely helpful if it is hard for you to keep up with multiple payments and multiple due dates.


Balance Transfer Cons


You will likely have to pay a balance transfer fee. Fees are usually a percentage of the balance you are transferring (generally 3%-5%), or a minimum flat rate (like $5-$10), whichever is greater.


Without discipline, you can easily rack up more debt. I have fallen victim to this trap...more than once. I transferred a debt, or consolidated, only to run my credit card balances right back up. The key here is discipline. Once you transfer your balances, it might be a good idea to cut up your card (now, I get rid of the card, but keep my accounts open...which is a completely personal decision).


The promotional rates won't last forever. Be sure to read the fine print. The promotional period for balance transfers is, most often, between 12-24 months. After that point, the APR goes right back up to what it normally is on your card. Be sure to read the fine print and know what you are signing up for! Create a solid plan to pay off that debt before the promotional period ends!


How Can You Get a Balance Transfer Offer?


If you haven't received an offer in the mail (I usually get them from my existing credit cards), feel free to call your creditor and let them know you are interested in a balance transfer! Ask them what offers they have available.


You may also receive balance transfer offers for new cards in the mail. Be sure to read the fine print and understand how opening a new card might affect your credit (hard inquiry=lower score, increased credit limit=improves score).


Whatever you choose, be sure to do your research and make sure it fits into YOUR financial plan!


-Chris





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