Can you use a credit card to get out of debt?Tuesday, June 19, 2012 at 5:27:42 PM
If you have a large amount of credit card debt, you've probably been looking for ways to reduce it, and sometimes, traditional repayment methods just don't work as well as you might need.
When it comes to trying to slash your outstanding credit card bills so that you can get a better hold on your financial life, there might be one avenue you're not acutely familiar with, or at least may not have considered as a viable option for reducing your outstanding credit card debt. Consumers who seek out balance transfer credit cards will typically be able to
significantly reduce their outstanding balances over a relatively short period of time and, in doing so, start to put their finances back in order.
How does this kind of card work?
You might have seen an offer for a balance transfer credit card and not even known it in the past. These accounts work by giving you a low interest rate for an introductory period, which allows you to pay into your debt without facing sizable charges for carrying a balance over from one month to the next. Often, the
teaser rates on these cards are for 0 percent interest for the first several months - typically between six and 18, but sometimes as short as three and as long as 24 - the account is open.
During that time, you might be able to significantly reduce your balance, and it will be important for you to consider your usual repayment amount and consider exactly how long you will need to reduce your balance given that total. The larger the balance, the longer you might need your introductory rate to last.
What to watch out for
There are two things you'll need to keep in mind when opening this kind of account. First,
there will be a balance transfer fee you'll have to pay for taking your debt from one card to another. This is usually about 3 percent of the total balance being transferred, and can be applied to your balance rather than paid in full if you prefer.
Second, you'll also need to consider the ongoing fee the new account comes with. These can be higher than you might be used to, so reviewing a number of credit card offers before filling out any credit card applications will be helpful going forward.