What is a balance transfer?

Moving a higher-rate credit card to lower interest rates is a great way to save money and debt. It’s a big debt and financially worse. This is especially true when you open a new credit card and you can take advantage of the promotional balance transfer offer.


Before you need a new, cheaper card

First, you will know that an approved person is a 0% bid or loan. You may have missed the latter deal because you do not know how much you can buy back. Why do you give yourself the temptation of the available credit if you can not use the new card to lower the interest rate?


Suppose you get a new low interest rate card – or you just want to move a lower interest rate. Check these benefits and disadvantages before balancing.


To save money

Reducing the interest rate on credit card debt saves money, of course. But depending on your business and fees, you may not be able to save money. Before you jump, do the math.


Say you have a $ 3,000 balance, the full annual fee is 30% (APR). That means you pay $ 900 a year. Sometimes you find a promotion with a fixed transfer fee and a 0% launch period, but we assume a 3% balance is required, which is common. In this case, the $ 3,000 balance is $ 90. The card payment is 27% APR, which pays $ 810 a year; add a $ 90 transfer fee and you’ll be interrupted a year later.


Conclusion: In this example, the business should investigate whether the THM is moving by less than 27%. Do not forget to specify the time frame in the equation but: Transferring the balance does not affect the problem unless you enter the appropriate amount. Use the free online calculator to calculate interest rates with dollar amounts and interest rates.


Get out of debt

You can also use a low interest rate to pay your debt faster. Suppose you can afford to pay $ 300 a month to pay the $ 3,000 balance. So this process would look at two different interest rates:


Scenario 1

  • Total debt: $ 3000
  • Interest: 30%
  • Debt: $ 300 / mo.
  • Monthly Debt: 12
  • Full paid interest: $ 496.01


Scenario 2

  • Total debt: $ 3000
  • Interest: 15%
  • Debt: $ 300 / mo.
  • Monthly indebtedness: 11
  • Full payment interest: $ 225.10


Conclusion: Scenario 2 comes from the Debt One Month release from Scenario 1 (and saves $ 270.91 in the process). The free online credit card debt calculator helps you see how long a credit card debt is spent on your monthly payments and interest rates.


Listening to debt

After transferring your balance from the higher interest rate card to the lower interest rate, carefully consider closing the higher interest rate card. Do not leave the extra credit line; trying to use it. If you are not there, you need to find more creative ways to cover costs and pay more attention to which purchase is needed.


– But what about credibility? True, closing a new credit card and an old credit card will affect your credit line. If you have fewer cards, you can reduce the total available amount, which may have a negative impact on the credit line if you use most of the available credits. Opening a new account shortens its creditworthiness in the short term.


Conclusion: If your goal is to get out of debt, you must take precedence over decisions that will help you achieve that goal. As you are there, you can concentrate on steps taken to increase your credit rating.


Exception: If you are asking for a mortgage in the near future, do not risk reducing your score by closing higher-priced cards. Rather than playing a credit card transfer game, low interest rates should be higher than interest rates.

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