You may have received an offer for a new credit card that provides an incentive for a balance transfer, such as a low or zero-percent interest rate. While it may not immediately reduce your outstanding credit card balances, it may help you manage your monthly payments and assist in paying off debt.
A balance transfer typically takes the amount owed on another credit card and places it on your new one. This may leave a zero balance on your former card. As explained by Bankrate.com, you may save money by transferring a high-interest balance to a new card with a lower interest rate.
How may a balance transfer act as a debt consolidation?
Some companies allow you to transfer balances from several revolving credit accounts onto your new card. If your new account has a high enough limit, it could hold the balances of more than one other account.
A benefit of having several cards consolidated on your new card is combining them into one monthly payment. You may no longer feel as though you are juggling so many financial burdens. It may help you create a manageable budget, and if you do not use the available credit opened up on your old cards, your overall debt load may begin to decrease.
What might I consider before accepting an offer?
The credit card company’s low-interest promotion may only last a limited time. The application should, however, describe the length of the offer and if a late payment triggers a penalty fee or higher interest rate. Check to see if anything terminates the promotion or increases the card’s interest rate.
Understanding how an offer could work within your budget may provide an easier way to pay off your debts. If you continue struggling after a balance transfer, you may seek other options for relief, including a bankruptcy filing.
