With summer quickly approaching, you're likely counting down the days until you can spend all day outside relaxing and enjoying the weather. With summer comes numerous fun activities, such as eating on a patio or taking an extended vacation.
When traveling, it's often recommended you use a credit card for your purchases. Not only do you get points for buying airfare, but some cards also offer protection for cardholders.
For example, you can take advantage of travel and emergency services, or if you're buying something online, those purchases may be protected, meaning you can return them or pay no extra fees for repairs.
But you have to be careful with your credit card usage. Use it too much without paying off your balance in full and your credit card debt will gradually increase. Not only are you then paying off your principal balance, but now there's interest to account for.
If you're looking for a way to lower your credit card debt, consider transferring your credit card balance. This move could potentially save you money in the long run.
What is a transfer?
A credit card balance transfer involves moving the balance from one card to a new line of credit. Essentially, you're paying off the old card with the newer one, and because of this, you should have good self-discipline in addition to a favorable credit score.
"You're paying off the old card with the newer one."
Transfers are made possible because new lines of credit typically come with a period of time during which there is no interest. Paying off an existing balance is that much easier when you don't have to worry about interest.
What to look for
There are a handful of features you have to keep an eye out for if you decide to reduce your debt by transferring a balance. First, you want to find out if there are any fees associated with a balance transfer, and if so, what they are, according to Bankrate. In some instances, the transfer fee is around 3 percent.
Next, you want to see how long the 0 percent annual percentage rate lasts. Per the Credit Card Accountability Responsibility and Disclosure Act of 2009, the introductory teaser rate must be a minimum of six months. Companies, however, typically advertise a longer period of time that will be interest free, such as 12 months or longer.
Successfully eliminate debt
Once you've found the right for a balance transfer, you have to remain disciplined to ensure you pay off the debt before the introductory rate expires. Otherwise, you'll end up spending more money because you'll have to pay interest. You should ideally pay more than the minimum balance in order to chip away at your debt at a faster pace. Additionally, NerdWallet stated that even one missed payment can result in the zero percent introductory rate being rescinded.
"Ensure you pay off the debt before the introductory rate expires."
Don't think of the new card as a new tool to go out on a shopping spree. In fact, you will want to avoid using the new line of credit as much as possible because you'll only be adding to the debt you're trying to eliminate.
As for your old card - don't cancel it. Instead, still use it but only sparingly. For example, try to make purchases you know you can afford in full every month, such as filling your car up with gas. You want to avoid maxing out your old card because you will have essentially negated the benefits of transferring a balance.
If you're looking to eliminate existing credit card quickly and save money, transferring a balance to a new line of credit may be the solution for you.
For more information about smart ways to manage your finances, contact Landmark Bank.
Back to Blog