Transfer Balances To Save Money

transfer credit card balances to save money

If you have high-interest credit card balances, you're not alone, as most people in the US have more debt than they can manage. In fact, the credit card debt load that many people carry is staggering. Here's what we mean!

According to data from LendingTree, Connecticut residents carry the highest average credit card debt among all states, whereas those in Kentucky hold the lowest.

Credit card debt can have detrimental consequences for individuals and their financial well-being. One of the primary reasons credit card debt is considered harmful is its high interest rates, often exceeding 20% annually. These interest charges can quickly accumulate, making it challenging for borrowers to escape the debt trap.

Credit card debt can also negatively impact credit scores, making it harder to secure loans or favorable interest rates. Overspending and relying on credit cards can also lead to a cycle of debt, where individuals need help making minimum payments and accumulating even more debt over time.

The burden of credit card debt can cause stress, hinder long-term financial goals, and limit one's financial freedom. Managing credit card usage wisely is crucial to avoid these detrimental consequences.

Fortunately, countless companies offer credit cards with enticing features due to the competitiveness of the credit card market. So, please take advantage of it.  Transferring balances is legal; you can take advantage of it as often as needed.  Here's how to go about it.

Ways To Transfer Balances To Save Money

transfer balances with credit cards

Consider Teaser Offers - The credit card industry is very competitive, so credit card companies will offer massive discount rates  - commonly called teaser rates - to encourage you to transfer balances to them. And although these ‘teaser rates will only last for a certain period, they can still save you a lot of money. These savings can be extended if you often switch to a new card, which has become more accessible due to the power of applying online. Though it may be a hassle, you can save hundreds of dollars simply by switching cards.

business woman on phone

Ask For Offer Extensions - There are situations where you don't need to move to another card to get a teaser offer for longer. If you phone and ask, many lenders will extend the preferential rate for longer, as any extra time they can keep you is profitable. But the key here is to ask for what you want because you may never get it if you don't.   

Pay Attention to When You Transfer Balances To Save Money - Your card issuers seem uninterested in alerting you when your teaser rate is over. So, keep track by yourself; mark it on your calendar, in your day planner, or even set it up as an alert on your cell phone. You can lose time faster than you think, and missing the end of the teaser period by a single day means paying interest at the standard rate...and sometimes even higher.

woman reading fine print

Pay Attention To The Small Print - It is expected that the low rate only lasts a few months, and you might also find that it only applies to balance transfers, not new purchases, an important distinction.

One tactic is for a card to allow you to transfer your balance of thousands at 0% APR while charging you 20% or more for any purchases afterward. An even meaner tactic to avoid is cards that don't let you transfer for a year later, thus meaning you spend a good deal of time out of the teaser rate.

How These Actions Affect Your Credit Rating - Moving debt around does affect your credit rating, although it isn't straightforward. One consequence is that it marks you as an unprofitable customer, as you will transfer before they can charge heavy interest. However, it also flags you as someone who takes up offers quickly. Overall, the more you do it, the fewer reasonable offers you receive, and the unprofitable-customer effect will eventually prevail.

So, you can use this strategy of transferring balances sparingly; when you do, instead of simply paying lower payments, continue making higher payments to pay off the balances faster.  And the quicker you do that, the sooner you can get out of debt, save money, and accumulate money - the ultimate goal of transferring balances is to save money.

Wrapping things up

In summary, transferring credit card balances to lower-interest cards can be a smart financial move, especially for individuals burdened by high-interest credit card debt. This practice can help save money, particularly given the high interest rates that often exceed 20% annually. However, it's essential to be aware of teaser offers provided by credit card companies, which can temporarily lower interest rates and lead to substantial savings. It's also crucial to track the end of teaser periods diligently and pay attention to the fine print, as some cards may have specific terms and conditions regarding balance transfers. While transferring balances can affect your credit rating, using this strategy sparingly and making higher payments to pay off balances faster can ultimately help individuals achieve their goal of financial freedom and savings.

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