Don’t get yourself in more debt
When you transfer a balance you’re most likely moving your debt from one credit card to another, creating a nice clean, empty credit card slate. If you’re not in control of your spending habits that slate won’t be clean and empty for long. Your attempt at saving interest will end up costing you more in the long run.
If a balance transfer option comes your way and you decide to go for it, consider closing the credit card account you’re moving the money out of. This activity will be a small, temporary, hit on your credit score. But if debt reduction is your goal then keep your eye on the long game and do what you need to pay down your debt.
Don’t forget good things do come to an end
Many balance transfer offers are promotional, meaning that the low, low interest rate will go from 0 to something much higher before you know it. If you don’t have a plan to pay off the balance you’re moving all you’re doing is postponing the inevitable, and you may end up paying a higher interest rate in the end.
Instead of blindly moving your balance from one card to another take a look at your budget and make sure you can take advantage of the temporary savings on interest and knock at least a good portion of your balance down during the promotional period. This will obviously reduce your overall debt, and it will also improve your debt to credit ratio and give your credit score a boost.
Don’t discount other alternatives
If you find yourself in an endless cycle of moving balances from one card to another and still being in the same amount of debt month after month, maybe you need to consider a different strategy. Maintaining revolving accounts, which is what a credit card is considered, can be tricky if you’re having a hard time managing your spending.
As an alternative consider a debt consolidation loan (this was something that was helpful for me). Most consolidation loans will pay off your credit card accounts and require that those accounts be closed once paid off. You will have a set term to pay the loan off (24 months or 60 months for example) and you’ll know exactly how much interest the loan will cost you. Be sure to sign up for a loan that doesn’t have pre-payment penalties – if you can pay it off sooner you will save even more on interest costs.
Getting out of debt is hard if you don’t have a plan. The cost of variable interest rates and fees will sneak up and bite you in the wallet if you’re not paying attention. Debt consolidation is one tool that can speed your journey to financial freedom if you plan it right.