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3 Facts You Need To Know About Consolidating Credit Cards Through Balance Transfer

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Consolidating credit cards is nothing new to a lot of people. Despite everything that happened during the Great Recession, Americans seem to have recovered from everything that they went through. They are now more confident to use credit. You can just look at the current credit card statistics to know that this is true. Even if the Federal Reserve has raised the interest rate several times, people are not feeling shy about borrowing money.

3 Facts You Need To Know About Consolidating Credit Cards Through Balance Transfer

While the use of credit can be beneficial, it can also be dangerous. It can compromise your financial future. This is why you need to make sure that it is always under control. If you can manage it, pay off your credit card balance in full at the end of your billing cycle. But if that is not possible, at least try to get rid of credit card debt within a year.

Getting out of high-interest rate debts as fast as you can is necessary to help you build a stronger and more secure financial future. Fortunately for you, there are many ways for you to do that and one of them is consolidating credit cards through a balance transfer.

The truth about consolidating credit cards through a balance transfer

A balance transfer card is a type of credit card that is usually offered with a 0% or very low interest rate. This is meant to attract consumers with credit card debt. The goal is to encourage them to transfer the balance to this new card. With the low-interest rate, consumers can expect to get a lot of savings.

Unfortunately, a lot of people do not even know that this consolidation option exists. They have no idea there is a thing called balance transfer cards and that it can be used to consolidate credit card debts. They are missing out on a lot because when used properly, this consolidation option will really cut down your interest payments by a significant amount.

Of course, to be able to use it properly, you need to understand 3 important facts about balance transfer.

There is a limit to what you can transfer

This will depend on the creditor that offers the balance transfer card. The range is usually between $10,000 and $15,000 and it is within a period of 30 days. Not only that, but you also have to consider your own credit limit. If the balance transfer card is only approved for $10,000, then you really cannot transfer more than that amount. Sometimes, creditors will insist that you only transfer up to a certain percentage of your credit limit – like 75% or something.

Make sure that you read the fine print before you choose a balance transfer card. That way, you can be aware of these limits.

The transfer of your balance is not immediate

When you find out that you are approved of a balance transfer card, you need to initiate the process of consolidating credit cards. You have to either go online or give the new creditor a call so they can help you with the process.

Once the transfer is in process, it usually takes between 7 and 10 days to complete. Again, this will depend on the creditor. There are times when it will take longer – especially when they encounter issues with your other creditors.

It is very important that you keep on paying your debts as usual – at least until the creditor informs you of the successful transfer. That way, you will not be charged with late penalty fees. That will just be another unnecessary addition to your debt and you definitely do not want that.

There will be fees

It seems counterproductive to pay for fees so you can save on your debt payments. But if you do your calculations correctly, you will realize that it will all be worth it. As long as you can save a lot of money on interest, you should be able to cover the balance transfer fees and still save a lot more. According to statistics, Americans paid around $113 billion in interest alone in 2018. This is probably caused by the way Americans increased their borrowing and the higher interest rates set by the Federal Reserve. So to escape the higher interest rates, consolidating credit cards through balance transfer seems like a great move to make.

However, make sure you pay attention to the fees. There is usually an option to waive the balance transfer fee but the 0% interest will only be for a few months. But if you accept to pay the fee, you can enjoy the low-interest rate for a longer time. Make sure you compute how much you will be saving to determine whether you will waive the fees or not.

4 steps to consolidate credit cards using a balance transfer

Now that you know more about consolidating credit cards through a balance transfer card, it is time for you to go through with the whole process. If you do not know how to do this properly, it can be a risky way to consolidate debt. But if you know the steps to follow, you should be able to use it to completely achieve debt freedom.

Here are the 4 steps that will help you in consolidating credit cards by using a balance transfer card.

Look at balance transfer options

Start by looking for different balance transfer cards that are currently being offered. These change over time so make sure you are looking at an updated list. There are websites that have programs that will help you compare rates and terms. This will make it easier for you to choose the best option that fits your financial situation.

Submit your application

Once you have made your choice, send in your application. Do not just fill out the form. You have to make sure that you will read the fine prints too. If there is anything that you do not understand, you have to discuss it with them. Never sign anything unless you are sure about the terms. Not only that, you have to make sure that you are getting the best rates and terms. That means understanding the qualifications and requirements. The higher the credit score, the higher the chances of getting the best terms. You can also feel free to negotiate – especially if you have a really high credit score.

Start the transfer process

As mentioned, this is not automatic. You need to get in touch with the new creditor to begin the process. It will take a couple of days to complete – as long as no issues will be encountered. Make sure you keep paying your dues until the creditor confirms that the transfer is completed.

Pay off the balance within the promo period

After the transfer is complete, start paying off the balance. You should aim to pay off all your balance within the promo period. That way, all your payments will go to the principal balance. If you have to make sacrifices, go ahead and do it so you can maximize your payments. The faster you can get out of debt, the more money you can save.

Now that you understand more about balance transfer cards, you can effectively use it in consolidating credit cards. If you follow the rules carefully, you will soon find yourself a few payments away from debt freedom.

Simple Tasks That Will Maximize The Positive Effects Of Consolidating Credit Cards

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Simple Tasks That Will Maximize The Positive Effects Of Consolidating Credit CardsConsolidating credit cards is really an effective way to solve a debt problem – especially if you have the right circumstances for it. Research shows that it is very easy for people to accumulate credit card debt. Apparently, people pay more when they use their credit cards instead of cash – sometimes up to 83% more.

A lot of people find it easier to spend using credit cards because it is very convenient. Not only that, it allows you to spend more than what you can really afford. You can just use your future earnings to pay it back when the billing statement comes.

But that is actually where the problem is. Some people find it so convenient that they easily abuse the use of their credit cards. When you fail to do something about it, the high-interest rates of the credit cards can easily overpower the financial security that you have built for yourself. Do not let this happen. You have to start consolidating credit cards so it will not become a threat to your financial future.

Habits that will make consolidating credit cards more effective

Consolidating multiple debts is more than just putting them under one credit account. More than anything, you need to learn certain financial habits that will help you improve your overall financial situation. Not only will this strengthen your debt relief efforts, but it will also help you sustain the debt freedom that you will enjoy in the end.

While you are consolidating your credit card debts, you need to perform certain tasks that will magnify the benefits of your debt relief efforts.

Update your budget plan

First of all, you need a budget plan. You need this regardless of the financial situation you are in. When you have this plan, you have more control over your finances. It is easier for you to check your current financial position – especially the expenses that you pay for every month. If there is a need to spend on something new, you can check the current list that you have so you can make adjustments. It is a great way for you to make smarter decisions. With this knowledge in mind, it is easier for you to guarantee the success of your efforts to consolidate your credit cards.

Stop using your credit cards

Another task that you need to do to ensure that you will benefit from consolidating credit cards is to stop using it. At least stick to this until after the debt relief effort is done. By keeping a tight leash on your credit card spending, you are not adding to your balance. You will have less to pay off. The sooner you can pay off your current balance, the sooner you can use credit cards again. Of course, you have to remember to keep your credit card spending low and to make smarter choices about it.

Make spending adjustments

Finally, you also have to make sure that you make the necessary spending adjustments while you are still paying off your debts. If you want to be successful at DIY debt consolidation, it is important to monitor where your money is going. You want to focus only on the things that you really need so the rest of your limited resources can go to your debt payments. The bigger the amount that you can pay, the shorter the repayment plan. When you get out of debt faster, you can start working on your other goals to improve your financial position.

How to make credit card consolidation effects last

After consolidating credit cards, your work is not yet done. It is important for you to realize that this debt solution is merely a repayment tool – not the actual payment. You still have a long way to go in terms of paying off what you owe.

But even if you have completely paid off your debts, you have to keep on making an effort to make sure it stays that way. According to reports, Americans pay their credit card debts but gained more than 90% of it back in no time at all. If you do this, you will just be stuck in a perpetual state of debt. Soon, this debt cycle will stress you out and one mistake might pull you over the edge.

If you have successfully gotten yourself out of debt after consolidating credit cards, make sure you fulfill these tasks to protect your new found debt freedom.

Choose the cards you really use, close the rest

Start by taking a look at all the credit cards that you own. Are you really using all of these on a regular basis? If not, then close them one by one. While having a lot of cards will help with your credit utilization rate, it will only increase the temptation to use credit. Not only that, you may be paying annual fees that are slowly draining your finances. Just keep the cards that you really use and earn rewards from.

Set credit card spending rules

It is also important for you to set rules that will guide you on how to use your credit cards. For instance, you can decide to use the card specifically for your groceries. Or you will only use it to buy gas. Once you have figured out how you will use it, you can set a budget for it. You have to stick to this budget so you can keep yourself from overspending. This budget should be put aside each month so you can pay your credit card bills in full within the grace period. This will keep the finance charges from being added to your debt.

Keep track of your credit card spending

Finally, you should also learn how to keep track of your credit card spending. It is very easy to overspend when your credit card feels like it holds endless funds. But we all know that is not true. It has a limit and maxing out your card is never a good thing. Not only that, the bigger the debt, the harder it is to pay off in full. You will end up having to carry over the balance on the next billing cycle and when that happens, the finance charges will be added to it. The bigger the balance, the higher the charges. Instead of letting the debt grow, it is easier to just track your credit card spending. That way, you will not waste the positive effects of consolidating credit cards.