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Should I do a credit card balance transfer?

Transferring some of your credit card debt to a card that offers an introductory low-interest period can help you move toward a debt-free life. However, there are some things you’ll want to be aware of first.

To help you make the right decision, read on for a list of the things to consider before making a balance transfer.

Pros

1. Lower interest debt

Obviously, your biggest push for making a balance transfer is to accrue less interest on the debts you’re transferring. Offers may even include zero interest for a period. With the Federal Reserve’s recent interest hikes, this may seem like an especially good time to move toward a low-interest balance.

If you’re stuck with a high-APR credit card, you can easily be paying upward of $80 a month, just in interest! Making a balance transfer will allow you to take a real bite out of your debt and make progress toward getting rid of it completely. You’ll be saving money and working toward an important goal at the same time.

2. Convenience

The more monthly bills you need to pay, the greater the chance of missing a payment. A balance transfer may allow you to consolidate the balances of several different cards into one. This way, the number of monthly payments will go down, and it will be that much easier to keep on top of payments.

3. Motivation

Too often, people get trapped in a cycle of debt. When they feel like they’re in over their heads, they continue swiping and spending as they please, figuring that another few hundred dollars won’t make a difference to the huge mountain of debt.

Many people find that taking this significant step toward paying down debt motivates them to be more careful with their spending habits. After all, you aren’t trying to get rid of your debt just so you can rack up another bill.

Be Aware

1. Rate in effect after the introductory rate

The appeal of a low-interest credit card is what draws you into making a balance transfer in the first place. However, at the end of a predetermined amount of time — anywhere between 6 and 21 months — your new interest rate will increase. While you may plan on paying down your balance before the new rate kicks in, circumstances may dictate otherwise and you need to prepare for part of your balance to be on the higher rate. Similarly, if you’re only doing a transfer for a reprieve from interest, you’re essentially treading water without making any progress on your debt.

Also, many balance transfer cards do not offer the same interest-free deal for any new purchases you make on the card after the transfer. If you plan on using this card for day-to-day purchases, you need to keep in mind the applicable interest rate.

2. Transfer fees

Most balance transfer offers charge a minimum of 3-5% of the balance you’re transferring in exchange for assuming that balance. While this fee may be nominal in comparison to the interest you can save, it’s important to note that balance transfers are not usually free of charge.

3. Credit Score

Keep in mind you are applying for a new credit card and your credit score will affect eligibility. Also, as you increase your available credit, it may lower your credit score. Be sure to monitor your credit score and consider closing cards you are no longer using. Of course, paying off debt will result in a better score in the long run.

An OC Federal Loan Zone Loan Officer can answer all your questions and get you on track for the best rates and options for your financial needs. Contact us about our current 5.99% APR* for 12 months credit card balance transfer offer. This offer is good until April 30, 2024, so contact us today!

Let a Loan Officer help you today!

*APR = Annual Percentage Rate. Subject to creditworthiness, OC Federal Credit Union lending policies, and membership eligibility. The 5.99% APR is a promotional rate on balance transfers from another financial institution made between the promotion period January 1, 2024 through April 30, 2024. Promotional APR of 5.99% is valid for 12 billing cycles from the date of first qualifying transfer. The APR on all other transactions and balances on your account will remain at the applicable rate in accordance with your credit card agreement. Other fees may apply. The maximum APR is 17.99%. The interest rate on qualifying balance transfers will remain 5.99% APR unless the account becomes delinquent and/or over the limit. All payments will be applied to the highest interest rate first. Existing OC Federal Credit Union credit card/loan balances are not eligible for the promo rate. All balance transfers made during the promotional period will be subject to a fee of 3.00% of the transferred amount. Minimum balance transfer amount of $500.00. All promotions are subject to the purchase of one $5.00 membership share required to be maintained in your share savings account. Reward points and/or Cash Back will not be awarded for balance transfers. OC Federal Credit Union may discontinue or modify this offer without notice.