Credit card debt is a major problem in the lives of many people. All too easy to accumulate, there are those who discover only too late that their level of credit card debt has reached almost unserviceable proportions. One way of obtaining breathing space with credit card debt is to transfer it from one card provider to another. This will often be in exchange for a fixed, interest free period, or at least a period where the interest charged on the transferred debt is considerably reduced. While it is entirely possible that transferring credit card debt from one card to another in this way may save you a considerable amount of money, it is important to look at the bigger picture, in the longer term, before agreeing to any switch.
The offer of zero percent interest on your debt for six months or perhaps even longer is very tempting when you are struggling to make credit card repayments. In theory, this could give you the opportunity to substantially reduce the level of your debt instead of paying little more than the interest it accrues each month. It is important to consider, however, what the interest rate is likely to be at the end of the period of grace. If it is going to be significantly higher than what you are paying at the moment and you are expecting to still have a substantial balance outstanding at that time, warning bells should immediately start ringing.
Where you intend to use the new credit card to fund future purchases, it will often be the case that new debt will immediately be subject to interest charges. While many people do realize this and factor it in to their calculations, they don’t always realize the way the payments they will make to their credit card will be allotted. In most instances, the full payment will be used to reduce the level of interest free debt until it is repaid, with new debt of any type incurring compounded interest charges in full during the same period.
Transaction fees have recently become more popular with credit card providers accepting balance transfer of debt. These fees usually represent a percentage of the outstanding debt and will be added to the balance on the newly opened credit card account. The percentage charged may be low but the amount can still be considerable on significant levels of debt and must always be taken in to account when you do your necessary calculations.
Conclusion
If you have managed to do some tough restructuring of your weekly and monthly expenditure and have decided to stop funding much of it with a credit card altogether, transferring your debt from one card to another as a first step in clearing it completely can represent a very powerful kick start. If, however, you are looking merely for a respite from hefty interest charges and are likely to need the services of a credit card for the foreseeable future, it is vital that you consider very carefully all the above points before potentially jumping out of the credit card frying pan and in to its fire.