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Using a Low-Interest Credit Card to Consolidate Debt

Woman planning out budget with card and computer
01.15.19
By: American Heritage

From festive lights to family get-togethers, the holidays are full of wonderful moments. But they can be quickly followed by something much less merry: a pile of hefty credit card bills. If holiday shopping or other expenses have you weighed down by large, high-interest credit card balances, you don’t have to watch this debt snowball out of control.

A balance transfer can be a great way to pay off high-interest credit cards with one lower-rate card, giving you an easier way to pay off this debt while cutting your interest payments (and stress).


BENEFITS OF A BALANCE TRANSFER

If you’re paying high interest on outstanding credit card debt, here are four reasons to look into balance transfer cards: 

  1. Savings
    One of the biggest benefits is the opportunity to save money on interest. Financial institutions’ balance transfer offers usually feature a special low rate or limited-time 0% introductory rate. If the offer is good, you could save big. 
    Imagine you transferred a $3,000 balance from a card that charged 17.99% APR to a card offering a very low 3.99% APR on your transferred balances. You could save about $400 on interest in just one month, and far more over time as you work to pay down this debt. Want to see how much you could save? Our Debt Consolidation Calculator can help
  2. Simplicity
    By turning multiple cards into one, you’re making life easier on yourself. You’ll only have one credit card bill and monthly payment to keep track of, saving you time and helping you avoid forgetting a payment. 
  3. New Perks
    Your new card could offer features that your current cards don’t, such as better rewards, identity theft resolution services, or extended warranties for your purchases.  
  4. Your Credit
    Managing credit card debt now is an important way to avoid falling behind on your payments. High credit card balances are challenging enough; why add the headaches that come with repairing bad credit? 


FINDING THE RIGHT CARD

Not all credit cards are created equal. When exploring your options, these questions can help you spot the pros and cons of balance transfer credit cards.

  • Are there transfer fees? Many credit cards charge a 2–5% fee just to move the debt to your new card. Only some cards – like our Platinum Preferred Mastercard– have no balance transfer fees (or annual fees, for that matter).
  • What kind of rate will you pay? Make sure the rate you’re switching to is low enough to justify the transfer. Many financial institutions offer an introductory period during which you’ll pay 0% interest on purchases and/or balance transfers. 
  • How long will this rate apply? These low intro rates are typically good for six to 15 months. But be careful: After the intro period, some cards’ rates rocket back up. If you want more flexibility, look for a credit card that offers a low APR on your transferred balances for however long it takes you to pay them off.
  • Can I qualify? Each financial institution has its own requirements to determine creditworthiness, and your credit score is a key factor. A good first step is to make sure your credit is in good enough shape to qualify for a balance transfer card (American Heritage members can check their current credit score for free through our Mobile Teller app). 


MAKING THE MOVE

After you choose the best credit card to consolidate debt, your new financial institution can help you with the process of transferring your current credit card balances. You’ll need to provide them with account information for all your current cards, and they’ll take care of it from there. Once each transfer has gone through, it will appear as part of the balance listed on your credit card statement. From here, it’s important that you create and follow a plan to help pay off that debt for good.

If you’ve been considering a debt consolidation loan or balance transfer to tackle your high-interest credit card debt, our Platinum Preferred Mastercard could be a great choice for you.

This card has no annual fee or balance transfer fee, offers affordable rates, and even lets you earn valuable rewards through our ScoreCard® Rewards program. Learn more about al lthis card has to offer here