From college textbook purchases to holiday shopping trips, credit card debt can start to pile up for a lot of people. Because they typically carry higher interest rates, eliminating any debt you’ve accumulated on credit cards can have a big financial impact. One simple tactic for paying down that debt is a credit card balance transfer.
A credit card balance transfer is a quick way to put more of your monthly payment toward the card’s balance by moving outstanding debt to a card with a better interest rate. If you shop around, you can find a card offering an interest rate as low as 2% or less for several months, making a transfer an especially smart strategy when you’ve zeroed in on paying off the card’s balance in the near future. If you’re looking to make a balance transfer, here’s what to keep in mind.
Know your costs
One key factor to consider before the switch is the transfer fee a new card provider may charge. “It is very common for credit card companies to charge a balance transfer fee of 3% or more. This amount can really add up,” says Julie Bruning, Vice President of Consumer Lending at Cobalt Credit Union. Transferring a $5,000 balance would entail of fee of $150, for example, at 3%.
Depending on how much you’re transferring, and how much lower the new interest rate is, the fee may not be a deal breaker, but it should always be factored in. Keep in mind while shopping around that some companies, including Cobalt CU, transfer the balance at no charge.
Also pay close attention to how long the introductory interest rate will last. Most transfers provide a very low interest rate for the first six months then step up to a more typical rate for the rest of the time you use the card. That’s a great incentive to pay off as much of the balance as possible during this favorable window.
Other considerations before switching are similar to those you’d look at with any new credit card:
- Shop for a competitive interest rate after the introductory period
- Find a card with a credit limit that fits your needs
- Consider annual fees and penalty fees
- Try to find a card that offers membership rewards
“The rewards on cards can include getting points for money spent and then redeeming the points for travel, gifts, credit toward your account, etc.,” Julie says. “Rewards can also include auto rental insurance, lost luggage coverage, roadside assistance, travel accident coverage, and travel emergency coverage.” With the variety of credit cards in the market, you should expect many of these services after you’ve transferred your balance.
If you’re looking for solutions to a high interest rate on your credit card balance, check out credit card balance transfers. It could save you money and help accelerate paying off the balance.
Have you made a credit card balance transfer? Tell us below how you decided which card to choose.
Cobalt CU’s transfer options
Be sure to check out Cobalt Credit Union’s options for credit card balance transfers. The credit union charges no fee on balance transfers and offers a six-month introductory rate of 1.99%. The cards also come with a user-friendly online portal for checking your statement and making payments, and the rewards program offers all the perks you’d expect from the best cards in the market.
Take a look at their options online or by calling (402) 292-8000.