A credit card with balance transfer is a powerful tool in your debt repayment arsenal. Balance transfer cards offer a special introductory 0% rate for a limited time on transferred balances. While you will have to pay a minimal upfront fee in most cases, being able to reduce the interest rate on high interest credit card debt to 0% can make paying off that much easier.
But balance transfers don’t make sense for every person in every situation. Before you decide that this approach is right for you, watch out for these three signs that transferring your balance is a decision you might regret.
1. You don’t have a plan to refund the transferred money
A balance transfer makes paying off your debt cheaper and easier, but it doesn’t make that debt go away.
You want to make sure you know how much money you need to send to the credit card company each month to pay off the transferred balance before the 0% rate expires. You’ll also want to make sure that you can find room for that amount within your budget.
2. Your expenses are not under control
If you open a new balance transfer card and transfer your existing credit card balances to it, you will free up the credit on your existing cards. It could lead to a huge financial disaster if you don’t control your spending. You could end up inadvertently charging even more money on your old cards even as you work to pay off your new balance transfer debt.
If this happens, you could end up beating yourself up as you will have the new balance transfer debt to pay off, along with any additional fees you charge on your old cards. You need to make sure that you won’t be tempted to abuse your credit cards before you make a balance transfer and release your line of credit.
3. Your card offers a 0% rate for a very short period.
Most balance transfer cards offer an introductory rate of 0% for a limited time, such as 12 or 15 months. If your card introductory period is short, such as six months, it may not give you enough time to pay off the transferred balance while still making reasonable monthly payments. You could end up with a huge balance remaining at a high interest rate.
Paying a balance transfer fee may also not be worth it if you only get the introductory rate for a limited time.
So before proceeding with a balance transfer, make sure that you are living on a budget, that you won’t be tempted to overspend, and that you have a plan in that budget to pay off debt before the rate expires. of 0%. And make sure the 0% rate is for a reasonable period of time. If you take these steps, we hope that transferring your credit card balance can help you get rid of your debt and can be a good first step to a better financial future.