No matter how well you plan, how much you save, or how carefully you manage risk, sometimes the worst happens and you find yourself carrying credit card debt. To avoid hefty interest charges piling up, it’s important to try and pay off that debt as quickly as possible.
There are several tactics you could employ to help accelerate your debt repayment, but a great first line of defense is to move your credit card debt to a balance transfer credit card with a low interest rate. If the debt you’re carrying can easily be paid off in a few months, this is one of the best options to help you become debt-free sooner.
The best balance transfer credit cards offer rock-bottom promotional interest rates, ranging from 0% to 11%. This promotional rate lasts for a specific duration, usually six to 12 months. If you’re carrying debt on rewards credit card with the typical 19.99% interest rate, balance transfer credit cards are a great opportunity to cut that rate by more than half.
A key deciding factor on whether you should use a balance transfer credit card is the amount of debt you have. It’s important that you only transfer an amount you’re comfortable paying off before the promotional period ends. If you can’t pay off the entire balance before the promotional period expires, the interest rate on your balance will shoot up (as high as 22.99%), and sometimes you’re even required to pay all of the interest that would have accumulated during that period. Make sure you read the fine print carefully on your application, so you are fully aware of all of the fees and penalties for not paying off your balance on time.
Speaking of fees, balance transfer credit cards also charge you a balance transfer fee – usually between 1% to 3% of the amount transferred. That said, the transfer fee will always be lower than paying the full interest charges associated with a regular rewards credit card.
Finally, if you’re considering using a balance transfer credit card, take the additional rewards and perks into consideration. Some credit cards may be able to offer additional perks and benefits that will make their credit cards more appealing.
For example, the MBNA Platinum Plus MasterCard offers a 0% interest rate on balance transfers for a full year. The American Express Essential Credit Card has a promotional balance transfer interest rate of 1.99% for the first six months and just 8.99% after that. Alternatively, the SimplyCash Card from American Express offers an optional balance transfer rate of 1.99% for new cardholders for the first six months (22.99% after that), but is also a very good rewards credit card. When you use this credit card for daily spending you’ll earn 5% cashback on groceries, gas, and restaurants up to a maximum value of $250, and 1.25% cash back after that.
No matter which balance transfer credit card you choose, it’s important transfer only as much debt as you’re comfortable paying off before the promotional period ends. If you can do that, you’ll be debt-free sooner and save hundreds of dollars in interest charges.