When you have outstanding debt, it can be helpful to consolidate it into one payment. While debt consolidation loans are a good option, you might also consider transferring your existing debt to a credit card with a lower rate. Transferring a balance is easy, and can be a quick way to reduce the interest you’re paying. Many credit card companies will provide an incentive or promotional offer for customers to transfer a balance by waiving the balance transfer fee or offering a lower interest rate for the amount transferred.
|Credit Card With a 29% APR|
|Months to Payoff||28|
|Finance Charges Paid||$1,914.21|
|Credit Card With a 12% APR|
|Months to Payoff||23|
|Finance Charges Paid||$606.74|
A balance transfer allows you to pay down a higher credit card balance by transferring an ongoing balance (commonly referred to as a revolving balance) to a card account that charges lower interest. As a result, this balance transfer can potentially save hundreds of dollars in interest. For example, let’s say you transfer a balance of $5,000 from a card account that is charging 29% interest to a card account that only charges a rate of 12%. If you make a fixed payment of $250 per month, the balance would be paid off five months earlier, saving you over $1,300 in interest charges.
Even if you’re not considering a balance transfer, it is wise to make a plan and budget a fixed payment amount each month to ensure that you are paying off your debt and minimizing finance charges.
If you’re revolving a balance on your credit card account and would like to learn more about balance transfers or other options for managing your credit card debt, consider contacting a personal banker at Union Bank to discuss your options.