Credit Card Balance Transfers Not Always the Best Solution, Caution Chicago Bankruptcy Lawyers
Imagine that you've got a $1,500 debt leftover from the holidays (not that big a stretch for some of us, no?). Now imagine that you receive an offer for an 18% interest rate if you transfer your balance from your current card - which has a 30% rate. Should you go for it?
It might seem counterintuitive, but the answer is often no. Even though less interest means less money in theory, creditors can make you jump through expensive hoops to get that lower rate - so expensive that they may cancel any benefits.
First, many credit cards charge transfer fees of 3 to 5 percent, according to the Associated Press. Are you willing to shell out $75 to transfer a $1,500 debt? Or $500 to transfer a $10,000 debt?
High fees can easily erode any savings you would have gained - and in that case, you'd be better off sticking with the higher rate and vowing to pay it off sooner.
Then there's the expiration date to consider. You see, that sweet introductory rate might not last all that long. Sometimes banks will lure consumers with offers of as low as 0% interest for transfers - without making it obvious that the good deal will only last for a year or even a few months. If you don't think you can pay off your debt in the near future, make sure that you know the terms before making a switch. And keep in mind that any special rate will likely be erased the moment you miss a payment.
Lastly, a new card can hurt your credit score, since it gives the appearance that you're a high-risk credit customer. When in doubt, ask your current credit card company if they can lower your rate - or transfer your balance to another one of their cards with a better one. Sometimes, you can use the threat of switching to a new card as leverage.
Ultimately, there's only one way out of debt - and that's by paying it off. Regardless of your rate, the sooner you lower your principal balance, the less interest you'll owe and the faster you'll be free of unmanageable credit card bills. And with bankruptcy, there's no debt too large to eliminate.
Find out how bankruptcy can help you reduce debt and achieve freedom from credit payments when you sign up for a free personal debt analysis with one of our Chicago bankruptcy lawyers. Why move debt around when you can make it disappear permanently?