Is now the Time to Transfer your High-Interest Credit Card Debt?
You may be receiving great balance transfer offers in the mail as of late, and you may be inclined to accept one of them and transfer your other higher-rate balances in an effort to lower your monthly payments and streamline your credit card debt.
However, just like any other financial decision, it is always best to look at every factor when considering if a balance transfer offer is right for you, or if it is the right time to accept one of these offers.
The following is a checklist that you may use to decide where the balance transfer offer is right for you:
- Introductory rate period – Balance transfer offers typically come with a low introductory rate that is designed to lure you into accepting the card. In fact, you can usually score a zero percent introductory rate when you accept a balance transfer offer. However, you will want to focus on the length of the introductory period to determine if transferring the balance will work for you. In other words, it is best to determine whether you can realistically pay off your balance during the introductory period, as the default interest rate after the introductory period ends will likely be much higher, thereby putting you into the same situation as you were before you accepted the balance transfer offer.
- Consider whether the low introductory period will counteract the balance transfer fee. Most balance transfer offers come with a balance transfer fee, which is usually a percentage of the amount transferred. This fee, which is usually about 5 percent of the transferred balance, can be quite a chunk of change. Therefore, it is important to consider whether transferring your balances will make financial sense. Consider the interest you will pay on your credit cards if you do not make the balance transfer, and then consider the amount of the balance transfer fee. You will quickly be able to determine whether it will benefit you to transfer your higher interest rate balances.
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