From losing weight and eating healthier to saving money, spending less or paying down your credit card debt, many Americans are making a New Year’s Resolution to live a better life. While many people drift away from their New Year’s goals by mid-January, we know that many others are still sticking with it and aiming to make this year better than the last. If you have made a financial resolution this year, in particular consolidating credit card debt, we have rounded up some helpful info on things to consider. While many people turn to credit card debt balance transfers, they may not be the best option for most.
Have you Considered Credit Card Debt Balance Transfers?
If you have considered a transferring your credit card debt, you’re not alone. I’m sure you’ve gotten the offers in the mail for 0% balance transfers for 12 months with a low APR after 12 months. But here is what you may not realize: by continually transferring credit card debt from one card to another, your credit is getting “hit” each time you submit a new credit application to perform a balance transfer and then close the accounts. Although leaving the old accounts open is another option, it may not help, as your credit score is affected by a number of variables, and continually having inquiries on your credit score can add up (negatively!).
Another issue to consider is that you may not be approved for your full balance transfer, which now leaves you paying down 2 (or more) cards. Now you have more minimum payments due every month, which may end up being more than you were originally paying per month. The impact of this higher payment and the continued interest on the original balance may cause you more headaches than what you started with.
Don’t forget that 0% doesn’t mean that the credit card debt balance transfer is free. There is almost always a balance transfer fee associated with transferring your credit card debt from one card to another. These fees can add up quickly – they typically range between 2%-5% of the amount of the balance being transferred and almost always have a minimum of some sort.
Another thing to keep in mind when you are considering using balance transfers for credit card debt is that the 0% (or whatever the low-interest rate is for transfers) likely does not apply for purchases. So if you plan on making purchases on the new card in addition to transferring your existing balance, make sure you read the fine print and know what you’re getting yourself into.
Lastly, keep in mind: If your debt has already affected your credit score, you may not qualify for those balance transfer offers to begin with. Which means that if you apply and get denied, you’re actually worse off than you started, as you still have the debt, the interest and now your credit score is even lower.
Alternatives to Transfering Credit Card Debt
It is recommended that you consult with a credit counselor for a credit card debt consolidation plan and debt relief programs that are specific to your debt, your income, and your goals before just opting for a credit card balance transfer.
It’s important to consult with a professional debt counselor when you make a decision to have a healthier financial future, especially if you are starting off with credit card debt. Trying to navigate through the different options for debt consolidation can be intimidating on your own. However, a debt counselor can help you by asking you the questions that you may not be asking yourself. For example, do you want to pay off everything with minimal monthly payments? Or are you interested in getting things paid off as quickly as possible? Are you willing to sacrifice reducing your monthly budget in order to pay down your credit card debt? How much can you really afford to pay monthly while still maintaining your standard of living? And are you ready to make some changes in your spending?
It helps to have a professional debt counselor to take you through your finances, your debts, and your goals to put you in the best position moving forward. If you are like the millions of Americans that are hoping to pay down your credit card debt this year, once and for all, contact a debt counselor at Christian Debt Counselors today for help.