We’ve all done it. You open a credit card and the rates look great at an initial glance—because you’ll never miss a payment, right? A big purchase comes around and you find yourself in a little more debt than you anticipated. That’s when your interest rate hits hard, each time increasing your already-unpayable balance to even higher levels. What should you do when credit card debt gets a little out of hand? In this blog, we’ll focus on how to successfully switch credit cards, and transfer your credit card balance, in order to both lower your interest rate and save you money.
What Are My Options?
Here is a short list of things you can do when you find yourself faced with an overwhelming balance:
- Dip into your savings account. One way or another, the debt has to be paid or it will naturally accumulate interest via the rate you and your credit company agreed upon. This is typically the primary option since you won’t have to deal with any fees or interest rates from new loans. Understandably, however, you may not have the cash on hand to pay the balance and it’s not a practice you’d want to make a regular habit of doing.
- Pay off the debt with a loan. This type of loan is designed to pay off your credit card debt and allow you to make payments according to a flexible repayment plan. The interest rate will be drastically lower than your credit interest rate, allowing you to pay off the principal balance much faster. That said, it’s always important to read the terms thoroughly and ask questions—some debt payoff loan promotions may have a maximum loan amount or a slew of extraneous fees.
- Transfer the balance to a lower-rate card. This debt consolidation option is typically the most cost-efficient. But it really depends on who you choose to work with. Big banks often have low or even 0% APR offers, but they’re almost always for a limited time and change to a high-interest rate after a couple of months. By contrast, some credit unions, like Common Trust, will give you an ongoing rate that never changes, so you can rest easy and budget accordingly. The rate will be much lower than that which you are currently paying, so you’ll be able to pay off your debt quicker. Promotions can also impact the rate you’ll receive, ultimately saving you even more money.
Transferring Your Credit Balance
So, you spent too much at the annual outlet
sale and found yourself in some serious debt. Time to panic, right? Wrong.
While there is a bounty of debt-eliminating options you can resort to—including
a Debt Payoff Loan or Debt Consolidation Loan—a balance transfer credit card is
typically the smartest, safest option.
To reap the benefits of a transfer balance credit card, you’ll start by filling out a card application. As with all big steps, be sure to ask as many questions as you need to finalize your decision. Make sure to double-check that there aren’t any drastic opening or closing fees, surprise rate increases, or any other types of random costs. In order to be approved for the new card, you may be subjected to a soft inquiry credit-check to be sure you make your payments on time and aren’t a huge credit risk. The bank will then pay off your credit card company for the current balance, and in exchange, you’ll owe the same balance with a comparably-lower interest rate. It’s that simple!
Changing Future Habits
After the dust has cleared and you’ve made the final payment to your Credit Balance Transfer account, you’ll likely want to re-think the way you manage money so you avoid future debt pitfalls. Making a resolution to manage and spend better is an optimal preventative measure to any type of debt.
The key to a healthy credit score and credit report is managing your money in a productive way and staying out of debt. Try to avoid spending money that you don’t have, and keep frivolous purchases to a minimum. Doing so will allow you to keep track of balances and ensure no line of credit is getting out of hand. Don’t open too many credit cards (even if the incentive is really great)—managing multiple accounts can lead to missed or late payments and breed into skyrocketing interest balances once again. If you do have multiple accounts open, checking in with Credit Karma every once in a while will help to manage all balances and keep them in check. Though this may not be the end-all to any financial hardship, it’s a huge step in the right direction.
Struggling to keep up with credit card debt? You’re in luck! Until March 31, 2020, Common Trust is proud to be offering our Credit Card Balance Transfer promotion. With a rate of 6.99% that stays fixed until your entire balance is paid off, you can focus on paying off your principal debt balance and not worry about having to get it done in a stressful, limited time period. This offer only lasts a few months, so don’t miss your chance to live debt-free—give us a ring or reach out via email today!