It’s that time again — your credit card statement has come in.
Your heart sinks because you know you’re going to be stuck with getting these statements for a long, long time.
You’ve racked up credit card debt. A lot of it. There is some good news, though.
Refinancing credit card debt can help you pay it off faster and save money on interest. One way to do this is with a balance transfer credit card.
What is a balance transfer credit card?
If you have a hefty credit card balance with a high interest rate, or if you have multiple balances with high interest rates, you can move that balance, or balances, onto a new credit card designed for consolidating credit card debt.
Advantage of balance transfer credit cards
These credit cards offer introductory 0 percent or low interest rate promo periods to help you pay off your balance quickly. You can save hundreds—if not thousands—of dollars on interest, giving you some room to breathe and a little peace of mind.
The application process is easy: You can apply online for most balance transfer credit cards or through your bank.
Disadvantages of balance transfer credit cards
Unfortunately, once the promo period ends, you can expect your interest rate to go up—way up. Promo periods typically last between 12 and 18 months, so you want to make sure you can pay off your balance within the promo period before you apply.
Also, some cards carry annual fees, and most, if not all, require a balance transfer fee you have to pay up front. Transfer fees are usually 3 to 5 percent of the balance amount you intend to transfer. So, let’s say you want to transfer $8,000. A 5 percent transfer fee would cost you $400.
Do balance transfers affect your credit score?
They can. Whenever you apply for a credit card, a creditor conducts a hard inquiry on your credit report, lowering your credit score up to 35 points each time.
In addition, the amount of time your credit accounts have been open makes up around 15 percent of your credit score. By opening multiple new credit accounts, you can damage your credit as you lower the average age of your accounts.
Why should you get a balance transfer credit card?
Balance transfer credit cards offer an easy, flexible way to help you get out of credit card debt while saving money on interest. Usually, you would apply for one if you fall into one or both of the following categories:
You have moderate to high amounts of high-interest debt
Your credit card debt is piling up, and you can’t seem to tackle it with your monthly payments because your interest rates are so high. The promotional interest rate offers a way to tackle this frustrating situation.
You have multiple monthly payments
It can be hard to keep track of multiple credit card payments every month. So you want to consolidate them to make sure you don’t accidentally miss payments or make the wrong payment on the wrong card, dinging your credit score and raising your interest.
The bottom line
You don’t have to keep struggling to stay on top of monthly credit card payments if your interest rates are too high. Balance transfer credit cards offer you a window of relief that can help you pay off your credit card debt faster while saving you piles of money on interest.
