A balance transfer credit card isn’t a magic pill that will make all your financial problems disappear. However, when used in the appropriate manner, it can go a long way in relieving some financial stress and helping you get back on solid ground.
Before applying for and using a balance transfer credit card you should learn more about the benefits, potential drawbacks, and the many types of problems it can cure.
Here are three problems a balance transfer credit card can immediately address:
1. Paying Too Much Interest
Simply put, the more credit cards you have the more money you’ll pay in interest. As long as you carry a balance from month to month you can expect to be hit with a finance charge.
Once you consolidate your debt with a balance transfer credit card this is no longer the case.
During the promotional period, which typically lasts somewhere in the range of one to two years, you won’t pay any money in interest. This allows you to really dig in and focus on paying down your debt.
Even after the promotional period ends, since you only have one credit card you won’t pay out nearly as much in interest.
2. Disorganization of Your Debt
With one credit card balance it’s easy to understand what’s going on. You know how much you owe, the interest rate, and other key details.
Conversely, if you have debt spread over multiple credit cards it can be a challenge to remain organized. This can take a toll on your finances as a whole, as well as your day-to-day life.
3. Inability to Set Goals
It’s hard to set both short and long term goals when you are unsure of where things stand in regards to your debt.
Imagine a situation in which you have three credit cards with a balance of $10k or more. Which one do you pay down first? What happens if you can’t afford to make a payment one month?
Once you better your situation with a balance transfer credit card it’s much easier to set goals that you can track and hopefully reach. You don’t have to worry about these types of questions bogging you down.
Have you cured one or more of these problems with a balance transfer credit card? What process did you take to get started?