Was getting your finances in order your New Year’s resolution? One of your biggest goals should be paying down any credit card. High-interest credit cards can put people in a financial hole — fast. If you have a large balance sitting on a card, it’s time to whittle that down and free yourself from high interest payments and wasted money.
But how do you get rid of that debt? It may sound counter-intuitive, but if you’re currently in a situation where yourseems unsurmountable, you may want to apply for another credit card: a balance transfer credit card. Used properly, the best balance transfer credit cards can offer a relatively cost-efficient opportunity to catch up on bills and reduce credit card debt. They can also help you consolidate your debt into a single payment, giving you a singular financial goal post, rather than several.
But how does a balance transfer credit card work? A balance transfer credit card lets you transfer debt from a high-interest old card to a new card with a low or 0% annual percentage rate for a set period of time — typically between 12 and 20 months. This gives you some breathing room to pay down or pay off your existing credit card debt while accruing little or no interest. The big caveat: Most credit card companies charge a fee on the transfer — usually 3% to 5% of the total credit card balance — and the longer the introductory APR period, the higher the balance transfer fee. Always look at the whole balance transfer offer, which will show the fee, before you make any decisions!
Choosing the best balance transfer credit card depends largely on how much you owe and how quickly you can pay it off. With a balance transfer card, the goal should always be to pay off the credit card balance by the end of the introductory APR period, which can have a huge impact on your ability to achieve or maintain a good Read more>>. For example, if you have a $6,000 credit card balance on a high rate card and you can afford to pay $309 each month, US Bank Visa Platinum’s 20-month 0% APR period would do the trick. With its 3% transfer fee, you’d end up adding only $180 to your transferred balance — compared to $1,221 with your old card, which is likely bogged down by a standard 22% APR…