subject: Should You Do a Balance Transfer? [print this page] Should You Do a Balance Transfer? Should You Do a Balance Transfer?
Deciding whether to do a balance transfer or not is very important in debt management. Though you can definitely pay off your debt without having to do a balance transfer, it is after all one of the most convenient ways of consolidating your debt and, more often than not, finding a way to pay less in interest. However, how do you know for sure if a balance transfer will definitely help you lower your debt?
To decide whether doing a balance transfer would be financially beneficial for you, you first have to list down all the balances and APRs on all your credit cards. This includes balances and APRs for different kinds of transactions on each card including purchases, money transfers, and previous balance transfers.
After this, you need to figure out how long it will take you to pay off all the balances of each credit card given the amount of money you can set aside exclusively for paying off credit card bills each month. A good rule of thumb is to assume that you will be paying the minimum required on all your credit cards, except for the credit card with the highest APR, which you should then spend the rest of your payment budget so as to pay more than the minimum each month. If you have enough money to pay one of the credit card balances as a lump sum, then factor that into your computation.
Once you know how long it will possibly take you to pay off your credit card debt, go online and compare credit cards. Find the credit card that will give you the best balance transfer rates and apply for that card. It is almost always better to apply for a new credit card if you want to consolidate your debt since there are many balance transfer cards that offer zero percent interest as an introductory offer. With this zero interest balance transfer cards, you will surely save a great deal of money, especially if you pay off your debt within the introductory period.
If you are not approved for a new card, figure out which of your existing cards will offer the best balance transfer rates. Transfer only the balances of the cards that have higher APRs. Do not forget to factor in handling fees and any early termination fees for balances from balance transfers and money transfers. Only if you are entirely sure that a balance transfer will save you money should you apply credit card balance transfers as a strategy for managing your credit card debt.
