Getting out of a debt hole is no easy task. If you’ve accumulated a huge amount of credit card debt, then perhaps you should consider a balance transfer credit card to help you get out of debt.
Balance transfer credit cards give you the opportunity to clear your debt by allowing you to pay for the debt minus the interest. These can really be helpful because you get to consolidate your debt into a single account with 0% interest, giving you a better chance to pay off your debt.
Sounds good right? However, just like any other credit card, it also comes with its own pitfalls and disadvantages. Before you use one, you should learn how to use balance transfer cards and its disadvantages or what it entails to avoid falling into the same whole that got you into this mess in the first place.
Zero-Interest Credit Cards
Balance transfer cards are standard credit cards that allow existing credit card users to pay off their debt without having to worry about interest payments within a limited period of time, typically ranging from 1 to 3 years.
Most balance transfer cards charge a transfer fee, which can range from 0.99% to 3% of the amount being transferred. While some credit card providers will allow you to transfer your credit to another card, others are not that kind. You may need to find a new issuer in this case.
Just a reminder: the longer the introductory rate of the card you are getting, the higher the fee that they charge. So be careful when choosing your cards. If you are confident that you can pay your debt within a shorter amount of time, then consider low fee balance transfer credit cards. Otherwise, you may just need to get one with a higher rate. The high transfer fee will still be worth the price since it gives you more time to pay off your current debt.
One big caveat for zero-interest credit cards is that it is not open for anybody. They normally take your credit history or your credit scores into account. Talk to your credit card provider to know if you are qualified.
Hard Work Pays Off
The journey to a debt-free life will not be just a walk in the park. After you have transferred your balance to a new card, you will need to work hard to pay off your current debt and work even harder to not take on more debt. Remember that your aim is to pay off your current within the introductory period. Otherwise, you will be accruing interest on the debt after the introductory period expires.
Additionally, the introductory rate of 0% interest will only be applicable to existing debt. Any new debt will still accrue an interest rate. For instance, if you have an APR of 15%, then any new debt will gain an interest of the same amount.
Before you obtain a balance transfer credit card, make sure you check not only your existing debt, but also the reasons why you gained the debt in the first place. Identifying your weaknesses and strengths to keep your spending habits in check should be the first step to financial freedom and a healthy credit history.