It’s been almost a month since the holidays ended. I would be willing to guess that there are quite a few Americans that spent more money than their budgets allowed. If this is you and the thought of paying off your credit card balance along with paying interest makes you nauseous then you might be considering a balance transfer credit card.
Most balance transfer cards will offer their cardholders up to 18 months of 0% APR. This is great if you have found yourself with a high credit card balance . Before you jump on some of the attractive offers available it’s important to assess your own situation to make sure it’s the best thing for you.
Why you should get a balance transfer card
One of the most important things any individual in debt needs to do is create a plan. Consider the amount of money that you owe and schedule how long it will take you to pay it off. Make sure your plan is aggressive, but still leaves you with enough money to pay your bills each month. If you have a good plan in place to have your debt paid off by the end of the period on the credit card, then a balance transfer card would be perfect for you.
Coming up with a great plan to pay off your debt and finding a balance credit card that has great perks, then you have a winning combination. Certain credit card providers will give you 18 months with 0% APR and sometimes doesn’t have an annual fee. Those are the cards you need to look out for.
Why you shouldn’t get a balance transfer card
For people who construct a solid “get out of debt plan,” balance transfer credit cards are great. For those that are less on top of their financial situation then probably not as much. When used the wrong way balance transfer cards can act as a crutch for borrowers. Instead of actually making a effort to pay down their credit card balance during the period they will let the balance float for that period of time. Unfortunately they end up right back in the same situation.
Understanding if a balance transfer card is the best thing for your situation requires a little math. Determine how long you feel it will take for you to pay off your balance. Then you need to figure out how much interest you expect to pay over that time. If that amount is greater than the transfer fee on the balance transfer credit card then it would be smart to make the move. However if you would end up paying more with the transfer fee than the interest on your original credit card then it wouldn’t make sense to switch.
It is also important to understand that most balance transfer credit cards are only available to good borrowers. If you don’t have a good credit rating then there is a good chance you won’t be approved.
If you have a solid plan in place to eliminate your debt and the numbers make sense then it can be an amazing tool. However, if your plan is to delay paying off your debt because you have 0% APR then these cards are probably not the best option for you.