Paying Off Credit Card Debt With A High Interest Rate? Consider a balance transfer

BATON ROUGE, La. (WAFB) – WalletHub Reports that Americans collectively owe credit card companies close to $ 1 trillion.

The average balance per household is approximately $ 8,089.

Think about those numbers, then factor in the interest rate.

RELATED: Build your credit from scratch with these tips

Depending on the type of credit card you have and your credit score, the average interest rate is approximately between 13 and 24 percent.

Multiply that by what you owe and that’s what you pay extra to borrow money from your credit card company.

If you’ve set a financial goal of paying off or paying off your credit card debt this year, consider a balance transfer.

“It’s often one of those two steps forward, a kind of situation that you find yourself in out of interest. So if you can target the interest, balance transfers are definitely one way to do it, ”explained Nathan Grant, Senior Credit Industry Analyst at CreditCardInsider.com.

This is basically where you transfer your debt from your interest collecting credit card to another without it.

“There are credit cards that have zero percent introductory APR. This usually lasts a year, a year and a half, sometimes up to two years. Having that period of time where if you had to have a balance, you could pay it off without accumulating all that interest, ”Grant said.

This is a smart option if you plan to pay off the entire balance during this introductory offer period.

It will save you money in the long run.

“If you make an initial purchase with a credit card, the APR will calculate a percentage of that balance. So as you reduce that balance, that percentage decreases or the amount of that percentage will be the same, but its value decreases, ”he explained. “That’s why it’s so important not to just pay the minimum payments on your debt because you’re really not making a part of it. Ideally, of course, you want to pay off the balance completely month-to-month. If you pay off your month-to-month balance on the billing cycle due date, you are actually avoiding interest because of the grace period. “

You need to do your research as there are sometimes fees that come with balance transfers.

These fees are either a fixed amount or between 3 and 5% of the total amount you want to transfer.

RELATED: No credit? 3 Steps To Qualifying For A Great Credit Card

“Do the math ahead of time to see, ‘Is the fee for transferring this balance less than the interest on these months that I would pay?’ Usually it is, ”Grant said.

The problem with balance transfers is that you always sign up for another credit card so there is going to be a serious investigation into your credit report.

Also, if you choose to open a new card to transfer your balance, try not to use it for new purchases as you are more likely to double the debt you have.

Grant said it’s all about being responsible as you strive to free yourself from debt.

Click here to report a typo.

Copyright 2021 WAFB. All rights reserved.

About Edward Weddle

Check Also

HSBC fund chief on reinvigorating a business in the age of Covid

Nicolas Moreau has barely said hello when his caretaker cuts him off to exclude any …

Leave a Reply

Your email address will not be published.