New year, new financial you?
Almost everyone sets new resolutions on January 1, but that’s the easy part. Your resolutions might be job related, like scoring higher on your PT test. Or maybe it’s financial, like staying within budget and paying down debt. When it comes to debt, have no fear – there are great financial offers and tools available to help pay off credit card debt and get you back on track.
We all know the best way to get out of credit card debt is to pay it off as quickly as possible. Start small by paying more than your minimum monthly credit card payment. But there’s also a top-secret tip you might not know about – you can also lower your monthly payment by using a balance transfer.
How can I use a balance transfer to pay off debt?
Many financial institutions offer attractive balance transfer offers, especially around this time of year as they know consumers have holiday debt to pay off.
“A balance transfer gives you the opportunity to shift your current credit card balance to a new card, usually with a lower rate,” said Justin Zeidman, manager of credit card products at Navy Federal Credit Union. “A lower rate means lower interest charges, which can help you to pay down your debt faster.”
If your credit card has an interest rate between 15 to 25 percent, you may be paying more in interest each month than you have to. The goal is to find a new card that works with your spending habits, offers a lower interest rate than your current card and has low to no fees.
A typical balance transfer offers a low APR anywhere from 12 to 15 months. Make sure that allows you enough time to pay off your balance before the variable Annual Percentage Rate (APR) kicks in.
“If possible, set up automatic payments along with text alerts on your mobile device to ensure payments are made on time,” said Zeidman. “Not only do missed payments negatively affect your credit score, but you could risk losing the low introductory rate as well.”
What are things I should consider when looking at offers?
Know the pros and cons before taking action, just as you would a successful military operation plan. Consider interest rates and fees first when looking at available offers. Once you pay off your debt or the introductory period expires, you’re still responsible for that new card and its new interest rate. Make sure when that time comes it’s still valuable for you. Also consider secondary benefits when opening a new credit card using a balance transfer, such as rewards programs or credit limit. And remember to read the fine print before opening a new card.