3 Benefits of Transferring Your Credit Card Balance
Most credit cards carry very high interest rates, so if you carry a balance, you can wind up paying a lot every month in finance charges. Transferring your credit card balance to another card can be a way to get a better deal. Here are three benefits of transferring your credit card balance to a different card.
Lower interest rate
One of the main benefits of transferring a credit card balance is getting a lower interest rate. Many cards will offer very low teaser rates to induce you to transfer a balance — even as low as 0 percent for people with good credit. If you can get a very low rate for 12 months or more, you can save a ton on interest costs and make a significant dent in your credit card debt. Keep in mind what the rate is after the teaser rate, however, as it could actually be higher than what you are already paying. You also have to look at what the fees on the balance transfer are. The higher the fees, the less of a positive effect of the lower interest rate.
Another advantage of transferring credit card balances can be fewer monthly payments. If you can get one card with a high enough limit, you might be able to transfer the balance from two or more cards to it, which will reduce the number of payments you have to make. Making fewer payments each month makes it easier to keep track of your finances and reduces the likelihood that you will miss a payment or make one late.
Getting a lower interest rate with a credit card balance transfer can help you to reduce your overall debt. For example, if you transfer a $5,000 balance and get a 0 percent interest rate for 12 months, paying $200 a month will cut the debt almost in half. Since the amount of debt you carry relative to how much credit you have can affect your credit score, reducing it significantly can improve your score.
These are three of the main benefits of transferring your credit card balance to another card. There may be others as well, but you have to weigh any benefits against any potential pitfalls. Transferring a balance can be a good way to reduce your interest rate and your debt level, but you want to make sure you are making the right decision.