Should I transfer the balance? Answer these questions to find out.
- Balance Transfer allows you to transfer the balance on your existing credit card to one card.
- You can lower the interest rate on your debt with a balance transfer and make it easier to pay off, but make sure it’s the right solution.
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You may have a fairly large credit card debt. If so, don’t panic. Credit card balances can go up, but if you put together a secure payment plan, you can get rid of that debt sooner. A balance transfer can be part of this plan.
Balance transfer allows you to transfer different credit card balances to one card. Why do you need it? First, consolidating all of your debt can make tracking easier. You are less likely to miss a payment if you only have one payment per month.
In addition, with the help of balance transfer, you can transfer the balance to a new card with a lower interest rate. This, in turn, lowers the cost of paying off the debt. In fact, many balance transfer cards come with a starting annual interest rate of 0%. This means that for a certain period of time (usually 12 to 18 months), you do not pay interest on the amount you are moving on.
While a balance transfer can be an effective way to pay off your existing debt, it may not be ideal for you. Ask yourself these three questions before subscribing to one.
1. Is my credit rating in good shape?
To qualify for a balance transfer, you usually need a decent credit rating. There is now no specific threshold when it comes to the right to transfer a balance. You can qualify for one offer at 680, while someone else can be turned down at 690. But generally speaking, if your credit rating is not in at least the top 600, it may be difficult for you to get approval. for balance. transfer.
2. What is the commission?
You usually pay a commission to transfer various balances to a new credit card. This commission can vary from issuer to issuer, so before signing up for a specific offer, you can take a closer look at them and weigh your options.
Typically, this commission is about 3% of the amount you transfer. And while this commission may seem impractical, if you can get a much lower interest rate on your debt through a balance transfer, it can more than offset itself.
3. Can I transfer all or part of my debt?
Most credit cards limit the amount of money you can transfer using your balance. If you have a lot of debt, you may not be able to combine it all on one card. If your goal is to make a one-time payment of a debt, this won’t work for you.
In this case, you might instead consider consolidating your debt with a personal loan. Personal loan allows you to borrow money for any reason. If you owe $ 10,000 on four credit cards, you can take a $ 10,000 personal loan, use it to pay off your cards, and then pay off that single loan with a monthly installment.
Keep in mind that although you can get a 0% interest rate when transferring balances for a limited period of time, you generally won’t get that option with a personal loan. But a personal loan can lead to a much lower interest rate on your debt than what your credit cards are currently charging you.
Is a balance transfer right for you?
Balance transfer can be an easy way to manage your debt and save money on your debt. Just be sure to answer these questions before moving on to one of them.
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