Credit Card Solution

Balance transfers are perhaps the easiest way to consolidate credit card debt and pay off multiple balances simultaneously. By consolidating the debt to a credit card with a low interest rate, the cardholder can effectively reduce the total amount of debt that needs to be repaid in the long term.

In fact, if a credit card with a zero APR introductory period is used as the main balance transfer card, then it is possible to completely eliminate interest and pay the balance off with no interest charged.

Unfortunately, there are occasions when balance transfer cards are used incorrectly, causing even more debt rather than reducing it. The following step-by-step manual on balance transfers can help anyone perform proper debt consolidation with a balance transfer credit card.

Step 1 – Finding a Balance Transfer Credit Card

The first step is finding a new credit card that will accept balance transfers at an attractive interest rate and without charging exorbitant fees. The most important features of a balance transfer card are the interest rates charged, both during and after the introductory period, and the length of the introductory offer. In general, it will be more difficult for individuals with bad credit to be approved for an optimal balance transfer card, but in principle, any card that has a lower interest rate than the existing card will be suitable for debt reduction and consolidation.

Step 2 – Transferring Balances

Some credit cards do not allow balance transfers, while others charge fees that are a percentage of the balance being transferred. It is very important to consider the amount of credit, and therefore the amount of fees charged, that will be required to transfer all existing credit card balances to a single card, as this amount can actually negate the advantage of the lower interest rates.

For example, if a cardholder transfers $1,000 from three separate credit cards to a new balance transfer card, and each balance transfer fee is 3% of the balance being transferred, that equals a total of $90 in fees (3% of $1,000 × 3 balances). The cardholder should ensure the amount of interest saved through the debt consolidation will be greater than the $90 being charged in balance transfer fees. Before consolidating debt to a balance transfer credit card, every cardholder should perform a similar calculation.

Step 3 – Applying for the Balance Transfer Credit Card

After examining all of the above factors it’s time to apply for the credit card. Most new cardholders find it more convenient to apply for the card online or over the phone. However, individuals who need assistance during the application process may find that branch visits are ideal, as the bank agent will be able to answer questions instantly.

Also, instead of applying for several balance transfer cards at once, it would be wise to conduct a thorough examination of each card before applying, to prevent further damage to the credit score in the event of several application denials.

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