Using Balance Transfers to Consolidate Credit Card Debt
If you're reading this, you are probably carrying balances on several credit cards. Perhaps you have other loans with less than favorable interest rates as well. If that's the case, you may be able to either reduce your monthly payments or pay off the debt faster by using balance transfers to consolidate credit card debt.
By shopping around for a new credit card, you can take advantage of low introductory interest rates for balance transfers. Often these introductory rates remain low for up to a year, as long as you make all payments on time. Some credit card issuers may even offer zero percent interest for the introductory period. Remember to read the fine print on the offer though, in some cases a single late payment cancels the introductory rate and imposes a stiff penalty rate. Penalty rates may be higher than the interest rate you are already paying.
You can take advantage of the low interest rates when using balance transfers to consolidate credit card to get rid of your debt faster if you can afford to keep paying the same amount each month that you were paying on your older, high interest rate credit cards. With a new zero interest rate card, the entire payment will go toward repayment of the principle rather than being split among principle and interest. If, on the other hand, you have been struggling to meet your monthly payments, the reprieve from interest charges may mean that you can reduce your monthly payments.
Of course, this only works to your benefit if you have the discipline to not use the old credit cards. Put them away. Cut them up. Do whatever it takes to avoid starting a new batch of debt. Since credit ratings are, in part, based on the ration of available credit to the amount borrowed, and the age of your oldest current line of credit, cancelling the old cards can actually damage your credit score. So using balance transfers to consolidate credit card debt can not only help reduce your debt or lower your monthly payments, but it can also increase your credit score by increasing the sum of your available credit.
Credit card companies are quick to offer you credit in hopes that you'll carry a large balance and continue to pay them interest for a long, long time. Be just as quick to take advantage of their introductory rate largesse to reduce your debt.
