- A balance transfer could make your debt easier and less expensive to pay off.
- But there are downsides to doing a balance transfer you should know about.
- There might be fees or a higher interest rate in store for you.
Don't rush into a balance transfer without thinking it through.
If you owe money on a number of different credit cards, you may find that keeping track of all of those minimum payments and their due dates is difficult. Plus, some of your existing credit cards might have higher interest rates attached to them, making your debt more expensive to pay off.
If you're juggling a number of credit card balances, you may be interested in moving forward with a balance transfer. With a balance transfer, you move your existing balances onto a single credit card, and then pay down that one card every month.
There are definite benefits to doing a balance transfer. For one thing, you'll only have to keep track of a single monthly payment. And if you have good credit, you might qualify for a balance transfer offer that comes with a 0% introductory interest rate.
But balance transfers aren't always the perfect solution to managing credit card debt. And so before you rush to do a balance transfer, consider these three reasons why you might end up regretting that decision down the line.
1. You might get stuck with costly fees
Most credit cards charge a fee to move a balance over. And that's an additional cost you may not want to bear at a time when you're already dealing with debt. Balance transfer fees usually amount to 3% to 5% of the sum you're moving over. For a $5,000 balance, you could get stuck paying up to $250.
2. Your credit score could take a hit
Applying for a balance transfer offer means having a hard inquiry performed on your credit report. A single hard inquiry might only drag your credit score down a few points. But if you're doing a balance transfer in conjunction with applying for other loans, you might get stuck with several hard inquiries back to back. And that could cause even more credit score damage.
3. You could get stuck with an expensive interest rate once your introductory period ends
As mentioned earlier, some balance transfer offers come with a 0% introductory APR. That means for a period of time, you won't accrue interest on the balance you're paying off.
That's a definite perk. But you'll need to be careful, because once that introductory period ends, the interest rate on your balance transfer card could skyrocket. And if your balance isn't paid in full by then, it could become even more expensive to whittle down.
Is a balance transfer right for you?
If you're tired of juggling multiple credit card payments every month and you have a good credit score, then you may want to look into a balance transfer. But make sure to do your research before diving in so you don't regret your decision. You may find you're better off paying off your existing balances individually in order of highest interest rate to lowest, rather than dealing with the fees and hassle of moving those balances over to a new card.
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