Pay Off Debt Sooner With a Balance Transfer

Matt Clay, Loan & Credit Card Specialist

January 14, 2014

Managing Your Money

Articles

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
Balance $5,000
Fixed Payment $250
Months to Payoff 28
Finance Charges Paid $1,914.21
Credit Card With a 12% APR
Balance $5,000
Fixed Payment $250
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.

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This blog article is for informational purposes only, and is not an advertisement for a product or service. The accuracy and completeness is not guaranteed and does not constitute legal or tax advice. Please consult with your own tax, legal, and financial advisors.