A balance transfer allows you to move your existing credit card debt to a new card, often with a lower interest rate or promotional period. This can help you save money on interest and pay off debt faster.
Key Factors to Consider:
- Transfer Fee: Usually 3-5% of the transferred amount
- Introductory Rate: Often 0% for 12-18 months
- Post-Introductory Rate: The rate after the promotional period ends
- Monthly Payment: Higher payments help maximize savings
When Balance Transfers Make Sense:
- You can pay off the balance during the introductory period
- The transfer fee is less than the interest you'd pay on the original card
- You have a plan to avoid accumulating new debt
- You can make payments higher than the minimum required
Tips for Success:
- Set up automatic payments to avoid late fees
- Pay more than the minimum to maximize savings
- Don't use the new card for additional purchases during the promotional period
- Consider the post-introductory rate when planning your payoff strategy
