People with credit card debt might wonder whether a credit card balance transfer is the best way to eliminate it. While this can be an effective strategy, it’s not a guaranteed success. There are several pros and cons to transferring credit card balances. 

The Pros of Credit Card Balance Transfers

No one would perform credit card balance transfers if there weren’t clear benefits to doing so. These are a few of the top benefits of transferring balances from high-interest rate credit cards to a new credit card with no interest for an introductory period:

  • You Get More Time to Pay Down Debt without Accruing Interest: The most damaging aspect of debt isn’t necessarily the amount you owe. It’s the interest you’re paying on it. Compounding interest can lead to debt growing into an amount far beyond the original sum. This is because you’re not just paying interest on the original loan. You’re paying interest on interest as well. When you do a balance transfer, you’re going to get an introductory period where you’ll be on the hook for little to no interest. Not having to pay interest for a while can lead to you paying down debt faster, especially because credit card interest rates tend to be so high.
  • You Consolidate Your Payments into One Balance: It can be challenging to keep up with your credit card payments. This is made even more difficult when you’re having to keep track of many different lines of credit. Doing a balance transfer can simplify things because you consolidate all those separate lines of credit onto one balance.
  • You Can Get a Better Credit Card for Your Needs: Not all credit cards are the same. If you have a few cards that aren’t doing you much good due to high interest rates or undesirable perks, you might be able to benefit from a balance transfer. Getting lower interest rates or more useful terms can go a long way. 

The Cons of Credit Card Balance Transfers

For every positive on the list, there’s a potential drawback to go along with it. Credit card balance transfers can work in some situations; but they’re not a miracle cure. Here are some cons associated with credit card balance transfers:

  • You Have to Pay a Balance Transfer Fee: The first big issue with balance transfers is that you need to pay an up-front cost in order to do one. This is usually going to cost you between three and five percent of the total balance. Having to pay this fee can potentially make doing the balance transfer not worth it.
  • The Low Rate Doesn’t Last Forever: Few things that seem too good to be true end up being that way. Balance transfers are no exception to the rule. That low introductory rate is just temporary. After the intro period, your interest rates are going to go up again—possibly to something even higher than they were before. For this reason, many consumers with serious credit card debt end up needing a more structured strategy like debt settlement. You can learn more about the pros and cons of settlement in this Freedom Debt Relief review.
  • Balance Transfers Could Make Things Worse: Due to the above factors, it’s actually possible that doing a balance transfer can put you in a worse position than when you started. It’s important you have a clear plan for paying off the debt if you’re going to do a credit card balance transfer. Otherwise, it’s not just wasted energy; it can increase your debt and worsen your interest rate. 
  • You Might Not Qualify for Great Terms: The terms of your credit card balance transfer are going to be partly determined by your credit score. If you have a low score, you’re not going to get the best deal from a transfer. It’s wise to keep this in mind when evaluating your options. 

Credit card balance transfers can be a helpful way for some people to reduce or eliminate their debt. However, it’s not a blanket solution. Make sure you understand what you’re getting into before you do a credit card balance transfer.

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