Using Balance Transfer Cards to Rid Yourself of Credit Debt

This post was written by Jason Bushey. Jason writes about credit cards and personal finance topics daily on Creditnet.com.

Paying off one credit card with another credit card sounds like a bad idea, right?

The average credit card carrier might think so, but the savvy consumer knows that transferring an old credit card balance to a new, 0 percent interest credit card is an easy way to save money on interest and prevent snowballing credit card debt.

Transferring your balance is simple, and there are credit cards targeted specifically at consumers in the market for such a transaction. Consumers that should consider a balance transfer include consumers that are:

1.)    Currently paying interest on an old balance.

2.)    Have found themselves paying off the minimum payment each month but getting nowhere.

3.)    Are in the market for a new card with better rewards.

4.)    Want to improve their credit by lowering their credit utilization ratio with a new credit card and a higher credit line.

5.)    All of the above.

OK, it’s not a multiple choice quiz; essentially, any consumer that’s feeling bogged down by interest should consider transferring their balance to a new, interest-free credit card. The process is simple and the benefits aplenty.

Here’s how it works…

The first thing a consumer considering a balance transfer should do is determine how long it would take to pay down their credit debt, interest-free. Just calculate how many months you need to pay down your debt all the way to zero.

Once you’ve got a ballpark estimate (say, 12 months), start researching credit cards that apply their 0 percent intro periods to balance transfers for at least the amount of time you’ve determined it would take to pay down your credit debt. We say “at least” because odds are you’ll be making some new purchases, too. You generally want to give yourself a little bit of leeway if you veer off your payment plan slightly. (Hey, it happens.)

Once you’ve applied for and received a card that works for your payment plan and your long-term wants and needs (rewards, low interest; remember, an intro period never lasts forever), then there’s no reason to hesitate when it comes to making your transfer. Intro periods are limited, and you’ll want to take advantage of as much of that 0% APR period as you can.

To initiate your transfer, simply call your new credit card issuer (or visit their website) and notify them that you’re interested in transferring over your existing balance. They’ll ask you for the amount, and for the company name and address of your old credit card issuer (easy to find online or on an old statement).

From there, it should take around 7 to 14 days for the transfer to be completed. This is because your new card issuer will literally send a check to your old credit card company to cover the balance, and once that check is cashed you’ll see corresponding balances on both credit cards. Remember, if your billing cycle falls within this period, you’re still for responsible for a payment on your old card.

Once your balance transfer is completed, the real work begins. This means paying down as much of your debt as you can, interest-free to rid yourself of that old credit card debt. To improve your credit score – and the chances of paying off your debt completely – it’s suggested that you make multiple payments each month.

However, consumers will notice a sharp decline in their balance when they alleviate interest fees with a balance transfer. This is a far cry from the snowballing debt you’re likely to have been dealing with over the last several months or years, and will likely make you wonder why you didn’t think of transferring your credit balance in the first place.

But hey, better late than never, right?

 

Tags: Balance transfer, Credit card, Credit card debt, debt payoff, payoff credit cards

Category: Credit Cards