Do you have a balance on your credit card that you believe you could pay off within a year – if it weren’t for that high interest rate? Are those charges just taking too big a cut from your payments? If so, a 0% interest rate balance transfer card may be helpful in paying off your debt. Let’s look at the pros and cons.
What Is A Balance Transfer Card?
This could be your lifeline if you’re drowning in interest charges. Simply put, you are transferring your credit card balance from one card (the high interest card) to another card – with zero interest.
Pros
If you feel you can pay down your debt within the 12 or 18 months that you have the 0% interest rate, then the big pro is that you can pay all that debt with no interest. Every dollar you are paying goes directly to the principal. Watching your balance decrease more rapidly can be very motivating and help you keep it up.
Cons
You will most likely incur a fee to transfer the balance. This can add a few percent to your existing balance.
The 0% interest rate does not last forever. There is a specific time frame you must pay your balance off if you want to take advantage of the no interest. If you don’t pay off the debt in time, you will be right back to paying debt with a high interest rate. Always look – before you apply for the card – at what the interest rate will be after the introductory time period is up.
Some Things To Note
Moving your balance from one card to another does not pay down your debt. All you are doing is moving your debt. If you feel you can pay your debt in a few months or less, opening another credit card may not be in your best interest.
You will need at least a good to very good credit score to be approved for a balance transfer card.
Applying for finance causes a hard inquiry on your credit report and could temporarily decrease your credit score. Hard inquiries are not a major factor in your credit score, but I wanted to throw it out there that you will get a ding. Learn about what goes into your credit score here.
Final Thoughts About a Balance Transfer Card
A balance transfer card can be extremely helpful if you have a manageable credit card balance. Manageable means you feel you can pay it off within the time frame provided to you. If you are committed and motivated to paying off your debt, this may be a way forward for you.
Before opening another credit card, I recommend you call your current credit card lender and ask if they would be willing to lower your interest rate. You probably won’t get 0%, but you may be surprised at how much they want to work with you. You never know if you don’t ask.
Would you like help taking back control over your money instead of having your money control you? Check out Ford Financial Management and see if we are a good fit to work together – the solution-focused way.
