Balance Transfers as a Way to Clear Debt

Posted on | December 10, 2010 | No Comments

If you have too much debt, as many people do, and the monthly payments are putting a strain on your budget, then look at clearing some of the debts by consolidating them into one single debt. Many people have more than one credit card, all at high interest rates.

For good financial advice, try to get down to a single credit card – then cut the others up. Many of the credit card companies will offer a special deal for a balance transfer. A balance transfer is a good way to clear debt, as far as credit card debt is concerned. Not only will you have one single account, making it easier to budget and control, but if you get rid of the other credit cards you will have less temptation to create still more debt.

You may be offered a special rate by the credit card company to transfer the balance of your other debts into their product, but be sure to read the terms clearly. Often there are initial costs involved, and the special rate is often for a limited period. Be sure that the rate after this period is not higher than what you are currently paying – unless you are certain of paying off the debt during the period of special low rates.

Sometimes you can even consolidate non credit card debt into the card as part of the balance transfer. Be careful of this though, as credit card interest rates are notoriously high, and are likely to cost you more than some of the loans you are thinking of consolidating.

Some banks will offer you a personal loan for debt consolidation, and allow you to transfer the balances of all your credit cards and your various personal loans and installment sale accounts into this single loan. This will generally be at a lower rate than the same option on a credit card.

Remember to close the consolidated credit card accounts, rather than running up new balances on those cards. Lastly, do a proper analysis of the total interest costs before transferring any balances. It pays to keep a loan which only has a short repayment period left separate, rather than consolidate them into a loan incurring interest for the next three years!

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