It will perhaps be shocking for many to know that in 2018, Americans clocked up more than one trillion dollars in revolving debt, primarily credit card debt in the process paying $104 billion in credit card interest and fees in a period of just twelve months, as per https://www.forbes.com.In case, like the average American, you are also paying a 16.46% rate of interest on your dues on multiple credit cards, getting good sleep at night could be difficult. If you are fed up being a slave to your credit card debt, you could consider debt consolidation using a balance transfer offer. It is easily one of the easiest and most profitable ways of getting out of your debt trap. However, before taking up a balance transfer offer, be sure to get to know all the important factors that could influence your decision.
Credit Card Balance Transfer Explained
From time to time credit card issuers launch promotional offers giving customers with a good credit score to transfer the balances of other cards to a new card, usually at zero percent rate of interest. The period of the offer differs from one to the other; typically, you can expect it to range from 6-24 months. The reason these promotional offers are given is that the card issuers want to build their books and acquire new customers.
Your Card Balance Does Not Become Less
When you avail of a credit card balance transfer, what you end up doing is paying off your existing card with your new card. When you sweep in the dues of all your existing cards, you end up freeing your lines of credit. However, the real benefit is the substantial savings that you can make on the interest during the promo period. However, the net savings that you make depends on the terms and conditions of the offer that you need to examine closely. Some cards charge a balance transfer fee of 2% to 3% of the transfer amount while others insist that the entire debt is paid up during the offer period otherwise, they will charge deferred interest that can wipe out all your savings.
You Can Simplify Your Life
It can be very difficult to monitor multiple credit cards. Often, even when you have an adequate cash flow to make the minimum payments, it can be all too easy to forget about due date and end up missing a payment. The result of this mistake is that you get slapped with a hefty late payment charge and your credit score takes a hit. For more information on how debt consolidation impacts your credit score visit https://www.nationaldebtreliefprograms.com/. If you are juggling multiple statements to make the payments, the situation can be worse. By sweeping all the dues of your different credit cards, you can significantly simplify your life because you no longer have to monitor different credit cards. You just have to ensure that you make the minimum payment every month while enjoying the interest-free offer.
Other Debts Too Can Be Transferred To the New Card
Credit card balance transfer schemes are generally not restricted to credit card balances. If you are paying EMIs on household appliances, cars, gadgets, furniture, etc. you can shift the balances too to the credit card by requesting the issuer company to issue checks to the loan companies to settle those accounts. However, you need to be careful not to exceed your credit limit on the new card. Further, carrying too high a balance on the new credit card also impacts negatively on the credit score.
Expect Balance Transfer Fees
Generally, the excitement of getting the zero-percent balance transfer offer is so great for people mired in heavy debt that they quite overlook the fact that while the interest rate is indeed zero for the offer period, the card issuer will almost always charge a fee for the transfer facility. Typically, most card issuers charge a percentage of the balance transferred; the rate is normally between two and three percent. It is quite rare to get a balance transfer offer that will not include such transfer charges, however, when they do it, generally the interest-free offer period is quite short. If you think you can pay back all the dues within a few months, you can examine these offers. A three percent balance transfer fee, which is the most common, does not seem much; however, if you are transferring a balance of $10,000, you will be charged $300 immediately that has to be paid with the first minimum amount due.
The Balance Transfer Offer Has an Expiry Date
You need to keep in mind that a special zero percent balance transfer promotion offer is a promotion that has a validity period. If you have received an offer that does not charge interest for 18 months, you need to be careful to repay all the dues within the offer period, otherwise, you will find that the dues will attract a steep APR, which may be even higher than that of the original card from where you had transferred it. Since the offer period is usually quite limited, you should only take them up, if you can stick to a disciplined plan of repayment to repay all the dues before the promo expires.
Do Not Assume That the Offer Applies to Fresh Purchases Also
It is important not to take for granted that the zero percent rate of interest on your balance transfer will also apply to fresh purchase on the new card. You need to read carefully the card terms and conditions to find out whether fresh purchases qualify for the prom offer or they will attract the normal APRs charged by the card. There is no hard and fast rule regarding this; some issuers include fresh purchases in the ambit of the offer while others do not. Even if fresh purchases are covered by the offer, it is inadvisable to swipe the new card as you will keep on increasing the dues and find it even more difficult to become debt-free.
A zero-percent balance transfer offer can be a great way to consolidate your card dues and other personal loan debts. However, whether you should opt for one depends on the terms and conditions of the offer, and if you have the discipline to eliminate all your dues within the promo period.