4 Ways a Balance Transfer Could Help Your Finances
Coming out of the holiday spending window, credit card balances tend to be higher. Instead of bringing the same debt into the new year, what if this is the year you become debt-free? A balance transfer can be a useful tool, allowing you to move a debt balance from one account to another at a lower interest rate. Check out the four ways this tool may help.
#1 – Consolidate debt from high-interest credit cards.
There was an introductory deal on that retailer credit card you couldn’t pass up, but now you’re left with a high-rate balance. With the average store credit card charging 24% interest, a balance transfer could save you hundreds of dollars.
Most balance transfer specials offer a low introductory rate allowing you to pay down your debt quicker. Before you sign on the dotted line, double-check that your post-special interest rate is lower than the rate of your current card.
#2 – Focus on paying down debt in one place.
By consolidating your debt, you can focus on paying it off quicker. With a low introductory balance transfer rate, most of your payment goes toward the principal amount on the loan rather than to interest.
#3 – In most cases, it does not affect your credit score.
Transferring your credit card balance between accounts, in most cases, does not negatively impact your credit score. If you open a new credit card to complete the transfer, you may see a slight dip from the credit check, but the additional credit availability helps even this out.
If you decide to close the existing account you are transferring your balance from, that may also cause your credit score to go down slightly. As an alternative, you may choose to keep the account open at a zero balance.
#4 – The switch can be at no cost to you.
When considering a balance transfer, look at all the terms. Low or no rate is great, but are there fees associated with the switch? Many balance transfer specials include no fees to consolidate. Save yourself a few bucks and do the research first.
Learn more about balance transfer options from BHFCU here.