Like most people, you’re probably bombarded with credit card offers – some with a 0 percent annual percentage rate. If you’ve looked at a few 0 percent offers, you may be wondering if it’s a good idea to transfer your existing credit card balances to a lower rate card. Here are some of the pros and cons of any balance transfer:
What are the “pros” of transferring your balances?
There are many advantages to transferring your credit card balances:
- If you have high interest rate credit cards, you can transfer to a lower rate card and save hundreds (if not thousands) of dollars over time.
- You’ll only have one card to repay – eliminating the need to keep track of multiple payment due dates and avoiding late fees.
- You may be able to pay off your debt faster because your payment will go toward your balance and not paying off interest. This can help you improve your credit score over time.
- The new credit card may have better terms overall – from a lower rate to low or no fees (especially annual fees).
What are the “cons” of transferring your balances?
Transferring your credit card balances to a lower rate card has its advantages, but there are also some drawbacks:
- Not everyone qualifies for promotional cards that feature a 0 percent interest rate. If your credit is average, it may not be worth your time.
- If you open a new credit card, it may negatively impact your credit score — especially if your combined balances are over 30 percent of your new credit limit.
- Be aware of the fees charged to transfer your balance to another card. Unlike GCEFCU, some places will charge you a fee of up to 5 percent of the balance you plan to transfer.
- You may be tempted to use the available credit on your old cards, driving up even more debt. If you don’t have enough discipline to have that amount available, cut up your cards or close them out. If you close out a card completely, there’s a chance your credit history may take a hit if you’ve had the card for a while.
Use this calculator to look at how much money you’ll save in the long run if you transfer your balances. If you think you’ll be able to pay off your balances faster by transferring your balances, it may be worth your time.
To learn more about the credit cards available at Gulf Coast Educators FCU, click here, or give us a call at 281-487-9333. We’re ready to get you on the road to financial freedom.
Information is for informational purposes only and is not intended to provide legal or financial advice. The views expressed are those of the author.?