Using balance transfer cards to eliminate credit card debt

Anyone who is carrying a large credit card debt should be doing all they can to pay this debt down. Credit cards are a great tool providing that any purchases placed on them are repaid during the 55 day interest free period. If you only make minimum payments and carry debts over from month to month then you are in fact paying interest on interest. All this is for lifestyle purchases that do not generate income nor improve your financial position in any way.

Choosing a balance transfer card

Look at the advertised offers on the internet. At any point in time there are dozens of balance transfer cards to choose from. They offer anything from 0% interest on all credit card balances that you transfer for up to 6 months to 1% on balances that you transfer for 15 months. It does not matter so much that the card you choose has 0%, the main strategy to follow is find a card that will take most of your debts (for some people 2, or 3, cards may be needed). All you do then is destroy your old cards and apply maximum money possible to reducing the debt on these cards during the low or no interest period.

Stop making purchases on credit, get yourself a debit card to prevent credit card debts from accumulating further.

Benefits of consolidating using balance transfer cards

The main benefit is the very low interest rate offered on these cards for balances brought across form other cards. In fact this is the cheapest form of debt reduction available to you when it comes to credit card debt.

There is nothing to stop you from rolling the remaining debt at the end of the low interest period to a new balance transfer card and enjoy a further period of low rates helping you to further bring down your card balance.

Risks of consolidating using balance transfer cards

The main risk with using a balance rollover card is that you return to your pre-transfer habits. That means start spending anew using the new card. This absolutely must not happen.

Remember the card provider will be marketing you encouraging you to use their card for purchases. That is the main reason why balance transfer cards exist. Car providers believe that excessive spenders are effectively addicts. If you give them a new card they will simply return to past behavior and will keep on spending. t s up to you to prove them wrong.

The other risk is not keeping track of dates and staying with the new card beyond their low rate offer. You absolutely must move your balance elsewhere once the new card starts applying their regular interest rate to your debt.

What if you can not qualify for a balance transfer card?

Not everyone is lucky enough to be able to follow this debt reduction strategy. To qualify your credit history must be intact throughout. If you develop bad credit, you will not be able to qualify for any more unsecured loans or credit cards and will  be forced to go into negotiation with your credit providers. This can either be an informal arrangement that allows you to reduce repayments in line with your affordability at least for some time until your finances improve or a formal debt agreement. Formal debt agreements are only available to insolvent borrowers and they offer an opportunity to these people to permanently reduce repayments and/ or debt balances in full settlement of the debt.

 

 


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