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This strategy to pay off credit card debt faster can save you thousands of dollars


Interest rates continue to rise amid inflation, and those with debt may find themselves in trouble as it snowballs. But there is a way not known to many that can bring substantial relief.

By Cheyenne DeVon -


If you don't know what transferring credit card debt entails, you're not the only person who doesn't.

About 61% of Gen Zers and almost 50% of


with credit card debt may not be familiar with cards that allow balance transfers.

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This is worth knowing:

High-interest credit cards can add up in debt very quickly

, but transferring that debt from a high-interest card to a 0% interest card for a limited time can help you gain control. Debt.

High interest rates on credit cards can add up in debt very quickly.Getty Images / '

"(Those cards) seem too good to be true in a sense," said Ted Rossman, financial industry analyst for Bankrate and

"The idea that you can avoid more than 20% interest for almost two years is incredible but it is real."

How balance transfers work

Balance transfer cards allow you to move debt from a high annual rate (APR) card to one with an introductory period of 0% interest, which typically lasts up to 21 months.

This allows you to pay off your debt without paying interest.

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Let's say you have $5,805 of credit card debt, which is what the average American has, according to TransUnion.

If your card has 20.04% APR – which is average interest – and you only make the minimum payments, you're going to be in debt for more than 17 years and end up paying $8,253 in interest, Rossman said.

If you had transferred that $5,805 of credit card debt to a 0% APR card and paid it all off in the initial term, you would have saved thousands of dollars.

Given the high rates, if you do not pay your credit card quickly, the interest will hit your pocket

March 22, 202301:50

However, balance debt cards are not available to everyone.

If you want to receive one, you need good to excellent credit.

The chances of being approved generally decrease if your credit score is below 670.

If they don't approve, don't panic.

"It's normal for a debt balance to be capped," said Melinda Opperman, head of external affairs at

"Even if your credit is good, the card you're transferring to may only approve you for a fixed amount."

In that case, you can transfer part of the balance, pay it off and make a second transfer later, he explained.

Always be sure to check the cost of the transfer, which can range from 3% to 5% of the amount transferred, as well as deadlines, to avoid late fees.

Avoid these common mistakes

Debt balances have some disadvantages.

First, keep in mind that opening a new account to transfer debt can negatively impact your credit score, because it can reduce the length of your credit history, as well as add a new card with new requirements, Opperman said.

However, over time, a balance transfer can lead to a higher credit score as long as you pay off the debt, make your payments on time and don't rack up more debt, he stressed.

Anyone doing a balance-of-debt transfer should be careful not to end up with more debt than they were before.

Experts advise avoiding the temptation to add to your debt and make new purchases, even if the card has no interest for a while.Getty Images

"Avoid the temptation to add to your debt," Rossman said.

"Making new purchases, even if they have no interest for a while, forces you to shoot a moving target. It's much more difficult."

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Also, be sure to complete the transfer within the 0% interest time period.

"Usually, you have to make the balance transfer as soon as (within 60 days) you open the account in order to receive 0% interest," Opperman added.

Commit to pay what you owe

The ideal candidate for a balance-debt transfer is someone who saves money doing it and is ready to make the commitment to reduce their credit card debt month-to-month, Opperman said.

Commitment is an important part: "A balance transfer may reduce the cost of repaying a debt, but it doesn't necessarily lead to debt repayment," he explained.

If you're ready to do so, this strategy can help: Divide what you owe by the number of months in the 0% interest offer to determine how much you have to pay each month to eliminate your debt, Rossman said.

And follow the plan to the letter.

"That's going to give him the best chance of success," he said.

Source: telemundo

All news articles on 2023-03-28

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