If you have credit card debt, improving your financial situation might feel overwhelming. High-interest credit cards can send you down a debt spiral, which can impact your finances negatively for years.
However, a balance-transfer credit card can help. If you’re tired of seeing a large portion of your credit card payments go toward interest, opening a balance-transfer card could be a smart money move. Here are some key signs it’s a good fit for your finances.
1. You’re Carrying Balances on Multiple Credit Cards
Having credit card debt can be tough, and it’s even more challenging when you’re carrying a balance on multiple cards. A balance-transfer card allows you to consolidate your debt so you have just one monthly payment.
This means you won’t have to juggle multiple due dates, making it easier to remember to pay your bill on time. Even better, consolidating your credit card payments into one could reduce the total amount of interest you’ll pay.
2. Your High-APR Credit Card Has a Significant Balance
If your current credit card has both a substantial outstanding balance and a high annual percentage rate (APR), most of your monthly payment is going toward interest. This can make it harder to pay off your debt.
By moving your debt to a balance transfer card with a lower APR, you can put more of your money toward paying down the debt and less toward interest, potentially paying it off even faster.
3. You’re Looking To Improve Your Credit Utilization
If your credit utilization isn’t great, a balance transfer may help. Your new balance-transfer credit card may offer a higher credit limit than your existing card(s), increasing your total available credit.
This matters because credit utilization plays a key role in both VantageScore and FICO credit scoring models. Plus, the lower interest rate on your balance-transfer card allows you to pay down the balance faster, boosting your available credit and improving your utilization ratio.
4. You Want To Pay Off a Large Purchase Over Time
When you need to make a large purchase, your budget isn’t always equipped to handle the upfront cost. For example, if your washing machine unexpectedly breaks and you need to replace it, you might not have the funds to pay for it in full.
In this case, a balance-transfer card can help you make payments while incurring minimal interest. Simply transfer the balance over to your new card and calculate how much you’ll need to pay each month to settle your debt during the introductory low APR period.
5. You’re Not Happy With the Terms and Rewards on Your Current Card(s)
Carrying a balance on a credit card isn’t ideal, but it’s even worse when you’re not happy with the card itself. A balance transfer is your way out of this situation without having to wait years to pay off your debt. Look for an option that doesn’t charge a fee to save even more, as many have perks and bonuses like collision damage waiver and travel and emergency assistance.
Final Take To GO
A balance-transfer credit card can be a savvy financial choice. If you have average to excellent credit and plan to carry credit card debt for the foreseeable future, this move could improve your financial situation in more ways than one.
Of course, balance transfers aren’t for everyone. Be sure to consider your unique financial situation before making a decision. This will help you choose the credit card that best fits your needs.
Jennifer Taylor contributed to the reporting for this article.