Should you do a balance transfer? Answer these questions to find out.
- A balance transfer allows you to move your existing credit card balances to a single card.
- You could lower the interest rate on your debt with a balance transfer and pay it off more easily, but make sure it’s the right decision.
You may have a large amount of credit card debt. If so, don’t panic. Credit card balances can add up, but by putting together a solid payment plan, you may be able to get rid of that debt sooner. A balance transfer may be part of that plan.
A balance transfer allows you to transfer multiple credit card balances to a single card. Why would you want to do that? For one thing, having all your debts consolidated might make it easier to keep track. You’re less likely to miss payments when you only have one payment to make each month.
Plus, with a balance transfer, you can move your balances to a new card with a lower interest rate. That, in turn, makes your debt less expensive to pay off. In fact, many balance transfer cards come with a 0% introductory APR. That means that over a period of time (usually 12 to 18 months), you pay no interest on the amount you transfer.
While a balance transfer might be an efficient way to pay off your existing debt, it may not be the right move for you. Ask yourself these three questions before signing up for one.
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1. Is my credit score in good shape?
To qualify for a balance transfer, you’ll generally need a credit score that’s in good shape. There is now no specific threshold when it comes to balance transfer eligibility. You might qualify for an offer with a 680 score, while someone else might be turned down with a 690. But generally speaking, if your credit score isn’t at least in the top 600, you may have a hard time getting the deal. approval for a balance. to transfer.
2. How high is the fee?
Typically, you’ll pay a fee to move your various balances to a new credit card. That fee can vary from issuer to issuer, so before you sign up for a specific offer, you may want to shop around and weigh your options.
Generally, that fee will be around 3% of the amount being transferred. And while that fee may not seem like something worth paying, if you can get a much lower interest rate on your debt through a balance transfer, you could more than make up for it.
3. Can I transfer all my debt or just part of it?
Most credit cards limit the amount of money you can move through a balance transfer. If you have a lot of debt, you may not be able to consolidate it all onto one card. If your goal is to make a single debt payment, that won’t work for you.
In that case, you may want to consider consolidating your debt with a personal loan. A personal loan allows you to borrow money for any reason. If you owe $10,000 on four credit cards, you can take out a $10,000 personal loan, use it to pay off your cards, and then pay off that single loan with one monthly payment.
Keep in mind that while you may be able to get 0% interest on a balance transfer for a limited period of time, you usually won’t get that option with a personal loan. However, a personal loan can result in a much lower interest rate on your debt than what your credit cards currently charge.
Is a balance transfer right for you?
A balance transfer can be an easy way to manage your debt and save money while you pay it off. Just be sure to answer these questions before moving on to one.
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