Debt can feel like a heavy, unshakeable weight that follows you around. But it can also be a motivator to pursue your financial goals and take control of your money. Although it’s unlikely that anyone pursues debt purposefully, it doesn’t have to be a life sentence. And although it’s an unfortunate reality for about 80% of Americans, there are fortunately ways to combat debt. One such way is with a balance transfer.
What is a balance transfer?
A balance transfer occurs when you transfer the balance from a high-interest credit card to one with a lower rate.
The basic premise is that you are using your new card to pay off your older card with a lower interest rate to help facilitate the process.
While this is a relatively simple concept, there are some rules to follow to make sure you are making the most of your balance transfer. After you open your new card and make the transfer, you are still “responsible for paying at least the minimum amount required by the issuer each month.” If this was a problem in the past, consider setting an alarm on your phone or computer to remind you to submit those minimum payments. Better yet, sign up for auto-pay.
How can it help me with my debt?
Transferring from one card to the next is only helpful if the interest rate on the newer card is lower. If done correctly, and you understand all the terms and conditions of your new card, this transfer can “be a tool to escape debt faster and spend less money on interest.”
Deciding if a balance transfer is right for you
As with any financial move, it’s wise to first have a plan in place and to do your research. Lucky for you, we’ve compiled a list of balance transfer tips.
Compare offers
There are countless credit card options on the market. Make sure you compare which ones you can apply for, interest rates, fees, and introductory periods. The DEXSTA site offers a side-by-side look at our credit card offerings so you can find the perfect fit.
Decide how much to transfer
Before you decide to move your entire debt sum from one card to another, consider that you can do a partial transfer as well. This can “allow you to take advantage of a card’s 0% intro period,” so you don’t have to worry about the regular’s rates impact on your balance. The easiest way to decide how much to transfer is to do some simple math. Figure out the monthly payments you can afford and multiply this number by “by the number of months you’ll have a low introductory interest rate.”
Don’t overspend
Lastly, the entire point of a balance transfer is to help alleviate your debt. Although it might be tempting to spend more on a new card, consider your original goal: to pay off your balance eventually. And keep in mind that the balance transfer interest rate is usually only applicable to the balance transfer. Other charges will still be whatever the card’s standard interest rate is. Overall, stick to your budget and payment schedule, and you’ll be on your way.
Trusting DEXSTA’s experts
A balance transfer is not for everyone. But if you have struggled to pay off your debts, it may be your best next step. At DEXSTA, we have a team of financial professionals ready to help. And with the backing of a credit union, you can trust that everything’s in your best interest (pun intended).