For most of us, debt is a trap.
With interest, annual fees, processing fees, late fees, and any other charges our creditors have issued, we feel as though this will take years, if not decades to pay off. However, with a balance transfer, that doesn’t have to be the case.
While it’s still going to require some financial planning to be successful with, balance transfers can help you consolidate your debt into one place with a fixed rate. This makes your debt digestible, as well as could be the key to you becoming debt free. And while that might sound lofty, with a little bit of discipline, it’s actually much simpler than you might imagine. Here’s why:
It Reduces The Risk Of Predatory Lending
As most balance transfer programs are used to get people out of debt, there’s a certain level of trust that’s built between the customer and the lender. Because of this, there’s less risk of predatory lending, as the interest rates that those services offer are astronomically high. And as noted by the American Bar Association, with predatory lending costing Americans around $25 billion per year, these practices can be avoided entirely by going for a trusted balance transfer card.
They Help Fix Your Credit Score
If you’re someone with multiple credit cards that are all over the place regarding when and what to pay, then you might want to double check your credit score. As late fees, interest rates, and inquiries may not seem like much at the time, the impact they could have on your score could add up quick. According to Value Penguin, with the average rating coming in around 695, if your score is hovering significantly below that, then not keeping up with your balances could be a clear contributor.
You Could Potentially Eliminate Interest
Most of us know that interest rates can be an absolute killer in knocking out our debt, being able to eliminate that is a huge reason people go with balance transfers. As Investopedia notes, a lot of credit companies offer 0 percent interest for one year. The trick? You have to make at least the minimum payment and can’t be late. However, if you’re genuinely looking for this strategy to get you out of debt, then making well above the minimum is crucial. Shop around to see if some cards might give you the most advantageous length of time to knock your credit cards out interest-free.
Everything Can Be Listed In One Place
Depending on the limit you’re approved for, you might potentially be able to transfer nearly all your credit and other debt into one place. This will not only take a load of stress off your shoulders but additionally give you the chance to come up with a cohesive plan to start saving and possibly investing. While this might all seem overwhelming to you, not to worry, because as noted by Time, the average household has $16,000 in credit card debt. And if you find yourself in that category, the path to being above water again can be much clearer with planning.
You’re In A Better Position To Start Prioritizing Other Debts
If you’re not able to consolidate your other debts, there are still solutions available to utilize with your balance transfer. For example, if you have anything in collections, then reaching out to a lawyer that helps with debt collection could be tremendously helpful. According to TASC, or The Association Of Settlement Companies, lawyers specializing in settlements were able to eliminate 70 percent of their debts within a year.
The Perks Of A New Card Could Provide Some Wonderful Benefits
A hack to consider when moving your current debts to a new card is the perks that you could receive. This includes anything from frequent flyer miles to cash back at some retailers. Depending on your current needs, look around and see how you could use this to your advantage. Because if you’re going to be paying off your debts, you might as well get something out of it in return.
You’ll Receive A Better Peace of Mind
Finally, perhaps one of the greatest benefits of a balance transfer is the peace of mind you’ll receive for consolidating your debt into terms you can pay off. Debt can be a stressor to even the most level-headed of us, but in taking steps to manage it, that burden becomes less cumbersome. Which begs the question, what’s preventing you from transferring your balances?