Choosing the right balance transfer credit card can make a huge difference in not only how much money you save on interest, but also, how quickly you get out of credit card debt. While 0% balance transfer credit cards may be the most tempting offers, oftentimes the best balance transfer deals carry slightly higher interest rates, but last longer.
To figure out what type of balance transfer card is right for you, it is important to assess your current financial situation and determine how much time you really need to pay your credit card balances down to zero. If you only need a few months, than a 0% APR balance transfer will likely be your best bet. But if you need more time, then resist tempting 0% rates and choose a low rate balance transfer.
Let’s say you have $2,000 in credit card debt on a card with a 17% rate. If you transfer this to a card with a 0% rate for six months and pay $330 a month, you’ll save about $100 on interest and be debt free in half a year. However, if you can only afford to pay $100 a month, you’ll get your debt down to $1400, but will either need to do another balance transfer or you’ll end up giving back the $100 you saved on interest and possibly more when the regular rate kicks in.
If repaying your balance within 6 months isn’t a realistic option, then a credit card that offers a 5.99% rate for a year is likely the smart choice. By choosing this type of balance transfer credit card, you essentially cut your interest rate down by two-thirds. This can help you save close to $200 on interest over the course of a year and, if you pay $100 a month, you can whittle your debt down to $600 before the standard rate kicks in. Plus, if you can find an extra $50 a month, you can be debt free in just one year.
Ultimately, the key to maximizing your savings with a balance transfer is to find a balance transfer offer that gives you enough time to sharply reduce your debt at a lower interest rate. If you only need a short window, then a 0% card will likely do the trick. But if you won’t be able to repay your credit cards in six months unless you win the lottery, then play it safe and choose a card with a long, low introductory rate. 5.99% may not be as tempting as 0%, but it could be the magic number that helps you save the most money and get out of debt faster.
This was a guest post contributed by Jeff from SmartBalanceTransfers.com/blog, a site which compares credit cards in the USA.