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It’s a crazy situation but some people find, soon after they get a credit card, find themselves wondering the best way to pay off credit card debt. People get credit cards for many different reasons. Some are looking to earn the rewards many cards are offering, others want to start or build up their credit score, and some just want a credit card for the convenience when cash is not available. But, what happens when you go a little overboard? You don’t stick to the, “I’ll pay off my balance in full each month,” motto you told yourself when you originally applied for the card and you are now paying more in interest than the rewards can cover. All the while your credit score is decreasing, and you are withdrawing money from the ATM every time you go out, so you don’t use your credit card anymore. Rest assured, there is a way to fix all of this and start getting more out of your money then just paying interest fees. The answer is a “balance transfer credit card.”
What is a balance transfer card? Consider it paying a credit card with another credit card. There are some important things to consider before transferring your debt from one (or more) credit card(s) to another and it is important to know the ONLY purpose for getting a balance transfer card is to reduce the interest you are currently paying.
Here are some things to look at when considering a balance transfer card.
1. There can be fees based on the amount of credit card debt you are transferring to a balance transfer credit card.
Today most balance transfer credit cards charge a rate of 3% of the amount you are transferring over. As this market continues to get more and more competitive issuers are dropping these fees and charging $0 for balance transfer fees in order to get your business. These “no balance transfer fee” cards are your best bet to save the most.
2. Consolidating your credit card debt can make your payment structure simpler.
By moving most or all of your debt onto one card, you know you are always making a payment to reduce your overall credit card debt. Instead of worrying about making multiple payments a month, you only have to worry about making one.
3. Balance transfer credit card teaser rates will expire.
The main reason you are transferring debt onto a balance transfer card is to reduce the amount of interest you are paying. These cards offer a low, or often a zero percent interest rate for an introductory period, usually 6 to 21 months or more. This gives you some time to reduce your debt and make your payments more manageable. This teaser rate is there for you to take advantage of and reduce the payments you are making. It’s important to note that the teaser rate only applies to the debt that was transferred to the card. If you make purchases on the card after you open your account and transfer your debt, you will be paying the full, regular interest rate the card has on these items if you don’t pay them off at the end of each month. In todays market there are some balance transfer card that do offer a teaser 0% APR rate in new purchases, but be careful not to dig your self into more debt and have the balance paid off when the teaser rate expires.
After the teaser rate expires you could be looking at an APR of up to 30%, depending on your current credit score. So be sure to come up with a plan to pay off your entire balance before the teaser rate expires.
4. Don’t expect to pick up another balance transfer card once the teaser rate expires.
By doing so, you will do more damage to your credit score than good, defeating the purpose of what you were trying to do in the first place. It will take hard work and you will probably have to cut way back on your spending during this process, but you will be much better off in the long run. Think of getting a balance transfer card as your one shot to get back to financial freedom and living debt free.
5. You need good credit in order to get approved for a balance card.
It is kind of a Catch-22 situation. You are trying to reduce your debt and possibly build your credit score, but you need good credit in order to do so. The credit card companies don’t want to assume too much risk from people who might default on their payments. Make sure to do your homework on the different balance transfer cards available. If you find that you do not qualify for any of the available balance transfer cards, do some research and find out why. The most common reason for denial is a low credit score. The best way to improve that is by reducing your debt. Work towards this as much as you can, and overtime your credit score will improve, and make obtaining a balance transfer card more realistic. Finally, always go into getting a balance transfer card with the mindset that you are getting this card for one reason, and that is to reduce your payments (by reducing the interest that you are paying) and to get as far out of debt as possible.
Most people don’t like to admit they are in debt, and sometimes don’t realize how they got there in the first place. But, a balance transfer card could be the solution to getting back to being debt free; therefore being able to spend your money on the things you want instead of interest payments.
Now that you know the answer to the best way to pay off credit card debt are you ready to reduce your payments and eliminate your credit card debt? Take a look at all of the Balance Transfer Credit Cards available through our partner site with the offer below.
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