3 Things to Consider Before Transferring Your Credit Card Debt

If you’re sick of paying interest each month on your credit card bill, then a credit card balance transfer is the easiest (and really the only) way to eliminate some or all of the interest fees attached to your credit debt.

Credit card balance transfers are pretty simple once you find the right card for your debt situation. However, before you hit the apply button on a balance transfer credit card, there are a few things to consider…

  1. Am I positive the credit card I’m transferring my debt to includes 0% APR on balance transfers?

This one sounds like a no-brainer, but skipping the fine print could be detrimental to your credit card debt reduction plan.

Many credit cards offer balance transfers, but far fewer include transfers in the 0% intro period. Make sure balance transfers are included in your intro period or you’ll be in for a rude awakening come transfer time.

Also, remember to note that there is a small fee for transferring your credit card debt – usually 3% to 5% of the debt your transferring, or $5 to $10 – whatever is greater. That’s a small price to pay for 0% interest fees, but it’s still something to consider.

The only credit card currently on the market that skips balance transfer fees altogether is the Slate from Chase – No Balance Transfer Credit Card, and their intro period is one of the longest at 15 months. If you hate fees (and you probably do), this is absolutely one of the best balance transfer cards on today’s market.

Once you’re sure you have the right credit card picked out, the next question to ask is…

  1. How much debt do I plan on transferring?

Are you planning on transferring some of your debt? All of it? And how much debt do you currently have?

Here’s the thing about balance transfers: you don’t want to do transfer your debt more than once or twice. So with that in mind, you really want to make that balance transfer count.

However, your current credit utilization ratio – that is, the ratio of your credit debt to the total amount of credit available to you on each of your credit accounts – is what will determine exactly how much debt you should transfer to a new card.

Ideally, you want to keep your credit utilization ratio under 30% on each credit card you own; anything above can have a negative impact on your credit score. So for example, if your new balance transfer credit card has a credit line of $1,000, you’ll want to transfer no more than $300 to this account.

If your current credit utilization ratio is above 30%, then transferring your credit debt to a new card is a great idea to improve your credit score and eliminate interest fees. We would recommend transferring as much of that debt as you can without crossing that 30% limit.

If that includes all of your debt, then that’s fantastic. If not, at least you’re eliminating fees on a good chunk of your credit card debt and moving in the right direction when it comes to your personal finances.

Either way, it’s a win – just make sure to do the math to avoid getting dinged on your credit score. And speaking of math…

  1. How quickly can I pay back my credit card debt?

The final thing to consider before applying for a credit card with 0% interest on balance transfers is the length of the intro period and, more specifically, how long it will take to pay back your credit card debt.

The way to do this is to come up with a realistic plan for paying back your debt each month. If you’re sure you can pay $100 per month back on your credit card and you owe $1,000 in debt, then consider a balance transfer credit card with an intro period of at least 10-12 months (to factor in new purchases).

If you feel you need a little bit longer to become debt-free, there are a number of solid credit cards on the market with 0% intro periods that can last anywhere from 15 to 18 months.

The Citi Simplicity® Card is one such card that makes consolidating your debt simple over 18 months, and the Discover® More Card – 18 Month Promotional Balance Transfer also includes 0% interest on transfers for a year-and-a-half.

Once you receive that brand new balance transfer credit card in the mail, make sure to transfer your balance as soon as you can to take advantage of the limited-time promo period. The clock is always ticking on 0% interest, and besides – why would you want to wait around month and pay interest?

Get your plan in order and start paying back your credit debt, sans interest, with a balance transfer credit card.

This guest post was written by Jason Bushey. Jason gives credit consumer advice daily on Creditnet.com.

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