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Strategies That Will Make Balance Transfer A Huge Success

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A balance transfer is one of the most effective strategies that you can use to get out of debt. This is actually a great debt relief option for people with multiple high-interest credit cards. It gives you the chance to consolidate credit card debts into one. Not only that, it helps you deal with the high interest rate. It specifically helps you save money as you pay off your debts.

Strategies That Will Make Balance Transfer A Huge Success

But just like all debt relief options, you need to know how to do it right to be successful at it. If you really want your financial future to be secure, you have to do more than just pay off your debts. You have to make sure that every payment will also help position your finances towards the future that you want to have.

For instance, if you intend to buy your own home after you pay off all your debt, you have to make sure that your credit score is high. That means your debt relief option should help you build up a good score.

Using a balance transfer card as a means to consolidate credit card debts is effective but it requires certain strategies to ensure that you will be successful. It can help build your credit score. But if you make even one wrong move with it, you can easily destroy all your hard work.

This debt relief strategy involves a new credit card that is offered with a 0% introductory rate (or a very low one). So if you transfer your other credit card debts, every payment goes to your principal debt and none of it goes to the interest. At least, it will until the promo expires. It will help you save a lot of money.

Different strategies that will make balance transfer successful

When you consolidate using a balance transfer card there are different strategies that can be used to ensure that it will succeed in improving your finances.

Choose what to trade off: balance transfer fee or longer promo period

First of all, you do not transfer your balance without a fee. You need to pay for the transaction. This is called a balance transfer fee. According to statistics, the average balance transfer fee is 3.46%. That means transferring $1,000 worth of debts would mean you have to pay $34.60. If your debt is $10,000, that means paying $346 for the transfer. As it gets bigger, people in debt start to think twice before paying it off.

Fortunately, there is a way around this fee. You do not have to pay it off but that would mean the promo period will be shorter. For instance, if you pay the transfer fee, the 0% rate can last for more than a year. But if you opt not to, it will be shortened to only a few months.

You need to choose which of the two will help you save more. Knowing how much of the debt you can pay during the promo period will help you decide. If you cannot pay it all before the promo expires, it might be best to pay the balance transfer fee so you have a longer time to pay off the debt.

Aggressively pay debts during the promo period

Another strategy that you can use to ensure that the balance transfer will be a huge success is to aggressively pay your debts within the promo period. As mentioned, the 0% interest rate is only valid until the promo expires. If you want to really benefit from this debt relief option, you might want to make sure that you increase your payments significantly while the 0% interest is still in effect. The bigger payments will shorten your repayment period. Since your payments are mostly going to the principal balance, it will help you achieve debt relief faster.

Avoid using the card for new purchases

The last one is not really a strategy to help pay off your debt. It is more of something that you have to avoid compromising debt relief success. The balance transfer card is still a credit card. That means you can use it for new purchases. It can be tempting but you need to curb the urges to use it. While the debt that you transferred has a 0% interest rate, this is not applicable to new purchases. Most likely, it has a high-interest rate – just like your previous credit cards. So if you want to make the balance transfer a success, keep yourself from using it on new transactions.

Facts about balance transfer that can affect your payments

As you try to pay off the debt you transferred, there are a couple of things that you need to remember about a balance transfer card. These can affect your payments – whether it is a positive or negative effect will depend on you.

Your credit score matters

First of all, this is a credit card so your credit score will still matter when you apply for it. Even if the creditor approached you with an offer, it does not mean you will be approved of it. If your credit score is low, there is still a chance that you will not be approved. There are still a lot of people with a really bad credit score. The lowest is 300 and statistics reveal that of the 200 million consumers with credit score, 20,000 of them have a score of 300. It is not likely that the creditor will approve the balance transfer if you have a very low score.

Keep paying until after the transfer is complete

While using a balance transfer card is promising, do not stop paying you usual debts until after you are given a formal notification that the transfer had been completed. Your application will still go through a process to determine if you qualify for the card. If not, then you will not be approved. If you stopped making payments, your original debts will incur late penalties. That will just make your balance bigger.

It is okay to have a low introductory rate

You should also stop focusing on the 0% interest rate alone. Sometimes, these have high annual rates, short promo periods and high balance transfer fees. Make sure you consider all these factors when making a decision on your balance transfer strategy. Even if you cannot find a 0% rate, as long as you will still save a lot because of the annual fees and other charges, then it might still be all worth it.

Benefits Of Setting Debt Milestones During Debt Consolidation

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Setting debt milestones can increase the chances of succeeding at debt consolidation. At a time when debt is steadily climbing, it seems like a lot of consumers are struggling to pay back what they owe.

Benefits Of Setting Debt Milestones During Debt Consolidation

Experts believe that higher consumer spending and more frequent use of credit are signs that the economy is doing well. However, these can only signify a better economy if the consumers are able to keep up with their payments.

Unfortunately, consumers are failing when it comes to paying what they owe. At least, this is true for some debts. Reports reveal that the delinquency rate of credit cards and unsecured personal loans have increased over time. Only mortgage loans have a lower delinquency rate while auto loans remained the same. The delinquencies refer to those that are more than 60 days late (90 days for credit cards).

When people start to default on their payments, you know that is not a good sign. You need to get serious by getting into a debt consolidation program.

Most of the time, people start their debt relief program with so much energy. But as time goes on, they falter in their efforts because of certain issues and challenges that were not present when they started. For instance, when you started consolidating debts, you were earning and spending a certain way. Over time, you will go through changes in your life that can affect your financial position. It can be a lower income or higher expenses. Both of these might compromise your ability to pay off your debts. If things get too hard, that might lead you to feel debt discouragement.

When you set debt milestones, you can directly address debt discouragement. These milestones can condition your mind to avoid feeling frustrated about your current financial situation.

Why debt milestones can help with debt consolidation

Debt milestones are like smaller goals that you will set throughout your whole debt relief journey. For instance, if your debt consolidation program will take 2 years to complete, you can set a milestone after successfully paying your dues on time for 6 months straight. Or it can be based on an amount that you have paid off. If you owe $50,000, you can set a milestone for every $5,000 that you successfully pay off. The idea is to identify these milestones so you can celebrate every time you reach one.

These debt milestones can bring the following benefits during debt consolidation.

It can make the process seem easier

First of all, it will keep you from feeling like your debt is such a huge burden. According to studies, celebrating success will release endorphins inside your body that will make you feel good. When you feel good, it reinforces the feeling of accomplishment. It gives you the right behavior to face and complete another milestone. It does not just influence your behavior but also your mindset. With the right state of mind, you can easily overcome anything.

It can make a long repayment seem shorter

Instead of thinking that the 2 years that you have to spend paying off your debts, you can focus on the first 6 months. You do not think about anything else except that time frame. When you focus on the 6 months instead of the 2 years, the task does not seem too much to overcome. You will feel like your debt will not really take a long time to complete.

It can give you something to look forward to

Think about it like running a race. It is easier to run if you can see where it will all end. You can focus on something instead of wondering when it will all end. You can gauge how you will use your energy during the run. Will you pace yourself and only give it your all when you are near the end? Or will you go all the way regardless if you risk total exhaustion? This is something that you can implement while completing your debt consolidation program. Having a milestone to look forward to will make planning easier to do.

It can make the process less stressful

Finally, having debt milestones during debt consolidation will keep things from feeling too stressful. After all, your debt relief program is cut into smaller milestones. If you focus on each part, your debt problem does not seem as significant as when you started. As long as you keep going after the next milestone, you will soon find yourself on the last leg of the debt consolidation program.

How to set up debt milestones

Now that you know how important debt milestones are, you need to know how to set them up. You want to do this correctly because it can be a great tool to help you achieve complete debt freedom.

Here are some tips you can follow.

Identify what will motivate you

Is it the idea of completing a payment? Or is it more of knowing how much you are saving? People have different perceptions and preferences. This is why you need to set up debt milestones that suit your personality. If you like to know how far you have come, highlight that in the milestones you will set up.

Divide the whole repayment program

Once you know what you will use in your debt milestones, you start dividing the repayment plan of your debt consolidation program. As you create a debt repayment timeline, you need to identify manageable milestones that are not too easy but also reachable.

Think of a cost-efficient reward that can excite you

After you have complete the repayment plan and identified the debt milestones, it is time to choose a reward. Whenever you reach a milestone, you should celebrate that achievement. To avoid splurging, you need to set the rewards beforehand. It does not matter what it is – as long as it excites you. Of course, you have to make sure it will not cost you a lot. You want to make sure you are being smart with how you spend your money. Your priority right now is paying off debt. Make sure your finances will not be used on something else.

4 Credit Card Habits That Can Ruin Your Financial Health

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Your credit card habits are probably to blame for all the debts that you owe. While it may not be the highest debt in your list, it is usually the most destructive.

4 Credit Card Habits That Can Ruin Your Financial Health

The truth is, having credit card debt is the norm in our society. Oftentimes, people treat it like an extension of their wallet. In fact, a study revealed that low-income families use it to cope with daily expenses. Those who earn less than $50,000 a year typically use it to buy groceries and other essentials.

While there is nothing wrong with using it to buy for basic necessities, it can be very dangerous. The high-interest rate of the card will cause your balance to go up quickly. If you are not careful, you might end up owing a lot of money within a short amount of time.

4 credit card habits that will lead to so much debt

Using credit cards is not bad but you have to know how to do it properly. That includes knowing what you should be avoiding.

Here are 4 of the most disastrous credit card habits that you need to get rid of.

Failing to pay your balance within the grace period

If you want to avoid the high interest rate on your credit cards, you need to learn how to pay the full balance within the grace period. This is the period between the date of purchase and the due date of the billing statement where that transaction is included. When you pay beyond this period, finance charges will be added to the balance. The bigger the balance the higher the finance charges that will be added. It can quickly grow your debt. This is the reason why it is ideal for you to pay more than the minimum payment requirement.

Making late payments

This is probably one of the credit card habits that can quickly destroy your credit score. If you have the habit of paying your dues late, you are not alone. Statistics reveal that around 40 million credit card holders all over the country expect to miss one credit card payment in 2019. If you want to improve your debt and financial situation, you have to make sure that you can stick to your payment due dates. Set up reminders to ensure that you will not forget a payment. Apparently, forgetting is one of the common reasons for late payments. If you find it too hard to keep up with all your credit card payments, you might want to consolidate your debts so your monthly repayment will be easier.

Reaching the maximum limit

If you have the habit of waiting for your credit card balance to reach the limit, then that is another habit that you need to get rid of. This can quickly destroy everything that you have worked hard to achieve. Some people use their credit cards recklessly and only make aggressive payments once they have reached the maximum limit. This is definitely one of the credit card habits that you need to correct. Not only will it lead you into a huge amount of debt, but it will also affect your credit utilization rate. This will influence your credit score negatively.

Opening credit cards you do not need

A lot of retailers offer store credit cards that will give you immediate discounts on your current purchase. That can be quite appealing especially if you were about to buy a lot of things. Getting a huge discount can easily sway you to sign up for the card. However, that is a really bad idea. The more cards you have, the more temptation there is to spend beyond your budget. Even if you have no plans of using these cards, you will still be charged with fees to keep that account open. This will just be a waste of your money. Eventually, it could have a negative effect on your credit score.

In case you are guilty of these credit card habits, you have to put a stop to them. You need to develop the right habits that can improve your financial well-being and not destroy it.

Try consolidating credit card debt to solve your problem

In case your bad credit card habits lead to the accumulation of your debt, you might want to consider getting debt consolidation help. This is one of the effective debt relief strategies that you can use to solve your credit issues.

There are a couple of reasons why debt consolidation can help improve your financial health.

Single monthly payment

First of all, consolidating credit card debts can simplify your monthly payments. Instead of trying to monitor all your credit accounts, you will be combining all of them under one account. It usually involves opening a new credit account that has enough funds to pay off your original credit card balances. Once that is accomplished, you are left with one credit account with the total balance of all your previous debts. You now have just this one account to focus on. That means remembering just one due date. The chances of forgetting a payment will be unlikely to happen. Not only that, it would be easier to incorporate that into your monthly budget plan.

Lower interest rate

Another thing that you will get from debt consolidation is a lower interest rate. Since there is no debt reduction when you consolidate debt, your best option is to ensure that you will have a low-interest rate. When you have mostly credit card debts to consolidate, you can get a secured or unsecured loan. Both of these have a lower interest rate compared to credit cards. This will allow you to save on the overall debt that you have to pay off.

Better repayment terms

By consolidating your debts into a new credit card account, you are also given the chance to change your repayment terms. Whether you want to have a longer or shorter repayment period, that is up to you. These changes will allow you to pay off your debts while allowing you to improve your financial future. For instance, if you wanted to start saving for retirement, you can choose a debt consolidation strategy that will allow lower monthly payments. Any extra money that you have can now be used to give your retirement money a boost.

As you pay off your credit balance through debt consolidation, you have to make sure that you are also working on another goal. You need to make sure that you come out of this situation with better credit card habits. Otherwise, you might find yourself in the same debt situation in the near future.