Balance transfers
If you are still keeping up your monthly payments on your credit cards, you have, no doubt, received innumerable offers from your credit card companies offering low or no interest periods of up to a year or longer on balances that you transfer from other "higher interest" credit cards.
These invitations also come in the mail from other banks seeking to lure your business away from your current credit cards.
There are, of course, good and bad aspects to what amounts to essentially debt consolidation by balance transfer. On one hand, it is an incredibly simple means of consolidating your credit card debt into one monthly payment. And, for a time, you will be saving a good deal on interest payments.
On the other hand, once the grace period expires, your interest rate will go back up to standard levels. This can be a rude shock if you have grown accustomed to the low interest rate. It can be an even ruder shock if you have fallen complacent and added to your balance by making excessive purchases with the card during the period of low or no interest.
A strategy for SOME
If you have the discipline to pay off a substantial portion of your debt during the grace period, this can be a viable option. Of course, if everyone had this level of discipline, few of us would be in trouble with debt in the first place.
Therefore, this method can be useful, if only as a short-term fix, for that rather exclusive group of people who:
- are current on their monthly credit card payments and
- your debt is limited to a few thousand dollars and
- If you have the discipline to pay off a substantial portion of your debt during the period of low or no interest
If you happen to fall into this select group, then it might be worth adopting this strategy, at least for the short term. During the year or so that your balance is subject to low or no interest, you should make a payment schedule and stick to it. RESIST the urge to make the bare minimum payments. Set a goal, say paying off 1/4 of the debt.
So if your total debt is $4,800, commit to paying $1,200 or $100 a month. Pay more any month you can, but at the minimum, stick to your schedule.
At the end of the year, you will owe only $3,600 (assuming a zero-interest offer), and you can then move on to eliminate the debt by using one of the other methods discussed on this site (or, if you can, by moving the balance to ANOTHER card offering low or no interest).
Bear in mind, none of this will work if you do not follow our dictate in "WHERE TO START" by STOPPING your spending on your credit cards. But with discipline, debt consolidation and reduction by balance transfer can be a viable option or stopgap measure for some people.
Continue on and compare the next debt relief method, CREDIT COUNSELING .