The average American has $6,354 in credit card debt. Thanks to APRs as high as 20% and above, credit card debt can quickly balloon, causing you to owe far more than you originally spent.
One way to tackle your debt and save money is to complete a credit card balance transfer. With this approach, you can get a lower rate, so more of your payment goes toward the principal rather than interest. It can help you save money and get out of debt faster.
What is a balance transfer?
With a balance transfer, you take advantage of a credit cards introductory APR offer and transfer your current high-interest credit card debt to another credit card. Many cards will offer you a set period of time for balance transfers— usually 12 to 18 months — at 0% APR, giving you more than a year to pay off your debt before the regular APR kicks in.
How to do a balance transfer
Doing a balance transfer is very easy. You can complete it in just five steps.
1. Search for a new credit card with a balance transfer promotional offer
There are many credit cards that offer balance transfer promotional periods at 0% interest. Some things to consider when reviewing potential credit cards includes:
- Length of promotional period: Each card will have a different promotional period. Some can be as short as six months, while others can be as long as 18 months or even longer. The longer the period, the more time you have to pay down your debt without worrying about interest.
- Balance transfer fees: Some cards charge a fee to transfer your balance to the new credit card. They can be as much as 3 percent of your credit card balance.
- Regular APR: Once your promotional period ends, the APR returns to its normal level. Credit card APRs can vary widely, so it makes sense to shop around for the lowest rate.
2. Make sure you understand the terms and conditions
Before applying for a new credit card, make sure you read the fine print and understand the terms, conditions, and any limitations the card may have. For example, some companies don’t allow you to do a balance transfer from one of their branded cards to another; you’ll have to use another type of credit card, instead.
3. Apply for the credit card
Once you’ve found the card you feel is a good fit, you can apply for the card online in just a few minutes. You’ll need to provide your personal information, such as your name, address, birth date, and income and rent or mortgage payment. In most cases, you’ll receive a decision right away.
4. Contact the credit card company
Once you’ve been approved for a new balance transfer credit card, go ahead and call the customer service line to request a balance transfer. You’ll need to provide the new card company with your old card’s account information, such as your card number and the amount you want to transfer.
It can take between five and 10 business days to process your request, so it’s important to keep making the payments on your current card until the transfer goes through to avoid costly late fees.
5. Focus on repaying your debt
Once the transfer goes through, focus on repaying your debt aggressively. At the very least, make sure you make all of your payments on time; one missed payment could end your promotional period, and you’ll lose out on the 0% APR offer.
It makes sense to pay off the card as quickly as possible while the card is at 0% interest, because more of the payment will go toward the principal, helping you save money. If you haven’t already, create a budget and identify areas where to cut back to free up more money to pay toward debt. If possible, pick up a side hustle or work extra hours to increase your income so you can pay it off even faster.
Most importantly, remain focused. It’s easy to return to the bad habits that got you into debt in the first place. My coming up with a plan of action, you can tackle and conquer your debt.
If you’re ready to attack your debt head-on, learn how these balance transfer credit cards can help you save hundreds.
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