One of the best ways to keep credit card payments as low as possible is to use a credit card with a low interest rate. In many cases, new credit card customers can get an interest rate of 0 percent for as many as 18 months after signing up. Those who have a large balance on a current credit card account may wish to transfer that balance and save money on their monthly payments. What are some situations when making a credit card balance transfer makes sense?
You Don’t Like Your Current Credit Card
If you think that you deserve a higher credit line, would like to take advantage of cash back rewards or simply don’t like your credit card anymore, it could be a good excuse to make a transfer. In the event that your new credit card comes with a higher balance, it could help your credit score as you are not using as much of your available credit.
Additionally, you could increase your credit score if your new credit line reduces your current debt balance to less than 30 percent of your total credit. For instance, if you owed $5,000 on a $5,500 credit line, you would have a credit card utilization rate of almost 100 percent. However, if you had a credit limit of $15,000, you would be closer to the 30 percent threshold that credit bureaus love when calculating your credit score.
When you switch to a new credit card, the company that you switch to may have better customer service. This can be important if you have to dispute a debt or accidentally make a late payment. In some cases, you will be hit with a large interest rate increase and late charge for making a payment even a few minutes late. However, other credit card companies may allow you to make one payment late without incurring any type of penalty. This can help your wallet now and your credit in the future by switching to a credit card company that allows for a late payment every so often.
The Promotional Period on Your Current Card is Almost Up
If the promotional period on your current credit card is almost up, it may be time to look for a new card that you can put that balance on. As long as you have good credit and a history of making timely payments, you should be able to roll your credit balances almost indefinitely. However, you may want to consider making a payment plan that you can stick to at some point as your debt may continue to rise over time. Credit card companies often increase the amount of credit available to those who make their payments on time, which could cause you to overextend yourself if you don’t budget properly.
You May Wish to Transfer All of Your Balances to One Card
Those who are thinking about consolidating their debt may wish to put all of their balances onto one card with a low interest rate. This can make it easier to keep track of your credit card debt as well as make only one monthly payment. When you only have to make one payment, it is a lot harder to forget to make that payment. It can also show you exactly how much debt you have to pay off. Seeing that you have $10,000 in total debt may make paying off that debt a higher priority as opposed to having $1,000 on one card, $1,400 on another and so on.
If you do consolidate all of your debt onto one card, do not cancel your existing cards. All this will do is hurt the average age of your credit, which could lower your score and ability to get additional credit in the future. For the most part, you can continue to keep those cards open with a $0 balance without running the risk of having your account closed. Anyone who is worried that they may use the money in the future may wish to cut up their credit cards or reduce the balance on those cards.
Make a Transfer Whenever it Helps Your Finances
There is never a bad time to make a balance transfer if it fits into your financial profile. Lowering your interest rate and lowering your credit card payment is never a bad decision even if you don’t necessarily need to do it. If you find a card that offers perks that you can use now such as cash back on gas or groceries, it can put even more savings into your pocket. During the holiday season, it may not be a bad idea to get a card that offers 5 percent cash back on purchases that you were planning to make anyway. You should also consider transferring to a credit card that provides you with your FICO credit score. Doing so can help you track your credit while you get a better handle on your overall spending.
A credit card balance transfer can be a great way to keep your spending in check while helping you get a better handle on your debt. Additionally, most cards come with cash back or other perks that can further help you save money on the things that you buy each day. Therefore, there is never a bad time to search for and switch to any tool that helps you remain financially secure and financially independent.
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