Imagine this: You used your current credit card to make a large purchase. You pay above the minimum payment every month, but you feel like it is taking a long time for you to pay down the balance. With federal interest rates rising, thereby causing increases in the cost for consumers to borrow money, you decide to look into conducting a balance transfer and review your options.
For borrowers with good or excellent credit, the advantages of balance transfers are plenty, starting with the chance to pay down debt at a lower cost. Balance transfers offer the opportunity to start fresh with your credit and move forward with not only a paid off balance but a positive effect on your credit score, too. Successfully paying off credit card debt through a balance transfer can save money on interest, provide an easy debt consolidation option, and result in a faster payoff.
Save Money on Interest
Every month, credit card statements list how much interest is charged and paid in each billing cycle, showing the consumer how much of their monthly payment is allocated to the principal and how much to the interest. If the credit card has a high interest rate, like those of store-branded cards, the interest is taking a noticeable amount of your payment each month. With a balance transfer credit card, this can be eliminated.
Many credit cards on the market offer a 0% introductory APR for balance transfers. In accordance with federal regulations, this rate must last for at least six months. This means that at the very least, you will have six months without paying a cost for your borrowed money. Having a balance with no interest results in immediate savings. Each payment made moving forward goes straight to your balance, allowing you to plan more accurately for repayment. Additionally, customers are locked into that 0% rate for the length of the stated period, despite any increases in interest rates.
When transferring your balance to a new card, you are not limited to one transfer. Keeping in mind the limit on the new card, customers may transfer multiple balances up to that limit. This provides a debt consolidation option for those with balances on several cards. After transferring those balances, you end up with only one due date and one company to repay. Consolidating your consumer debt to one single company makes repayment easier for you. There are fewer passwords to remember, less due dates to track, and fewer payments coming from your bank account.
The 0% interest rate and the debt consolidation both combine to provide another benefit to balance transfer credit cards: a faster payoff. Knowing exactly what you owe assists in planning for repayment. The introductory 0% rate has a defined period within which you’ll want to pay off the debt. The money you were previously paying interest acts as an additional payment. You can save months on your repayment plan by switching to a balance transfer card.
You now know the benefits of the balance transfer process and it’s time to consider another scenario. Imagine that you used your credit card to make a large purchase. You inquire about a new card with a 0% introductory period for balance transfers and transfer the amount there. You continue to make the same monthly payments and in a short amount of time, you realize the debt is paid off. What’s not to like about that? Take a few minutes out of your time today to research what offers are available to you. You’ll thank yourself later.