Credit card transfers can be worrisome for certain individuals as they can often lead to more debt; however, when used appropriately, they can be a helpful financial tool. If you are thinking of doing a credit card balance transfer, there are some things to consider. Be sure to consult with a financial professional as every individual's situation is unique and a credit card balance transfer is not suitable for everyone.
What to Look For
A couple of things to look for are cards with no annual fees and low balance transfer fees (3%). It is important to make sure that there is a 0% APR on both purchases and balance transfers to help you save money on existing debt and current spending. Introductory offers with the longest 0% APR term (20 months) can help make your monthly payments more affordable; however, be sure to keep that introductory term end date on your radar! If there is still a balance remaining, other options should be considered to avoid another high percentage interest rate. Be sure to think about your goals and weigh the options...consider the different benefits of cash back rewards for new purchases vs having a longer introductory offer of 0% APR.
Pros and Cons
One of the pros for doing a credit card transfer is that paying off debt becomes considerably easier when you are given the chance to avoid interest for a year or more. It is beneficial that every dollar goes towards your principal balance rather than a large portion towards interest owed. Another benefit is that it is a relatively easy process to do a balance transfer. It is generally just an simple online application compared to the consumer loan application process. Finally, once paid off, having less revolving debt can boost your credit score.
On the other hand, the purchasing power of a new credit card can be a stressor, especially for someone who already has credit card debt. Application approval is also necessary so some individuals may not be eligible. It's also important to note that applying for another credit card can temporarily lower your credit score.
If you decide to do a credit card balance transfer, be sure to stay diligent with your payment plan and budget. Designate someone reliable to keep you accountable if need be. If technology is your thing, download a helpful budget/spending application such as Mint or PocketGuard. Finally, be sure to keep your long-term goals in mind and stay true to them. Just think of the monthly payment amount that will be freed up once you have reached this goal towards financial freedom.