Transferring a high-interest credit card balance onto another credit card with more favorable terms might seem like a no-brainer. While transferring credit card balances can be a good way to cut down on interest charges and help you to pay off debt faster, there are also some things to consider before you do a balance transfer. If you’ve never done a balance transfer before, it can be especially helpful to learn the following:
You’ll usually need good credit
The whole point of transferring a credit card balance is to lower your interest rate. In order to qualify for a new credit card with a low interest rate, you’ll usually need good credit. If your credit score hasn’t changed much since you got your initial credit card—or has gotten worse—you won’t want to apply for another credit card, especially one with better terms. There’s a good chance you’ll get declined, and you will have a hard inquiry on your credit profile. To improve your chances at getting your application approved, make sure your credit has gone up considerably before you apply for a low-rate card.
Lower APRs may just be introductory offers
It’s one thing if you’re transferring your balance to a credit card with a low APR that is fixed. But many low interest rates are introductory offers, and you might want to avoid these in certain circumstances. If the APR will skyrocket once the introductory period is over, for instance, you might want to keep shopping around for credit cards in case you won’t have the balance paid off on time. In certain cases, an introductory offer can be worth it—if the offer is zero percent and you have a generous grace period before the interest rate goes up, for instance. Whether you go with a limited-time promotion or a lower interest rate credit card overall, just be sure to understand the terms completely.
You may not be able to transfer your entire balance
There’s no guarantee that you’ll receive a credit limit on your new card that matches or exceeds the balance you need to transfer. As a result, you might end up only being able to transfer a portion of your balance, and you’ll still have two separate credit card payments to worry about. Although this could still save you money because the interest on a portion of your balance will get lower, you’ll have to question if it’s worth opening up another credit card for.
You could rack up on more debt
On the other hand, you might get a credit limit that fully supports your balance transfer—and with a lot of extra credit left over, too. If you have a problem with spending and credit card use, it can be a temptation that’s difficult to avoid and you might end up charging extra on it. If you’re worried about actually spending more money in an attempt to cut down on your debt and expenses, you may want to reconsider opening up that new credit card.
Do you need extra cash to take care of bills and expenses? Whether you have credit card debt to eliminate or there’s a large purchase you want to make, Peachtree Financial Solutions may be able to help get you the cash you need. Contact Peachtree Financial Solutions today to learn how you can sell some or all of your future structured settlement payments for a lump sum of money.
Nothing above is meant to provide financial, tax, or legal advice. You should meet with appropriate professionals for such services.