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Pros and Cons of Balance Transfers
17 Feb 2019

Credit Card 101: The Pros and Cons of Balance Transfers

People may not be dying from debt, but they’re dying with plenty of it. In 2016, 73% of people who’d passed on had more than $62,000 of unpaid debt.

Most people who are deep in debt have considered a balance transfer between cards. There are some enticing reasons to do it. But, there are downsides to these offers.

You’ll need to look at the pros and cons of balance transfers, first. Here’s what to know before you do it.

Pros and Cons of Balance Transfers

It looks good on paper, but is it the best choice for you? It all depends on the amount of debt, the interest rates, and transfer fees you’ll need to pay.

The only real reason it makes sense is if it will save you money in the long run.

Pro: Simplify Your Payments

Taking several credit cards and consolidating them into one payment is convenient. It simplifies your budget and bill paying process. This can save you time and confusion if you have lots of open accounts.

t can help you pay your debt off earlier, too. You can increase the amount of the payment to make more progress. That’s what puts simplifying through consolidation on the pro list.

Con: Balance Transfer Fees

But, right when you think you’ll save a ton of cash, here’s a balance transfer fee! Almost all offers have them, so be aware of what you’re paying for the transfer.

It’s a one time fee, usually around 3% of the total balance you are transferring. The credit company will add it on to your balance. This is a con because it is actually adding to your debt instead of reducing it.

Pro/Con: 0% Interest Offers

This seems like a great idea when you have high-interest rates on your credit cards. And, it is!

The only catch is that it is an introductory rate. You’ll get 0% interest for a specific time, then it switches to a higher percentage afterward.

Learn what that rate is before you make the switch. It may not be worth it.

What puts 0% interest offers on the pro list? Paying that transferred balance off within the introductory period. Doing that will save you large amounts of interest in the long run.

But, here’s why it’s a mixed situation.

If you can’t pay the total balance before the introductory period expires, it may not be worth it. You’ll add a balance transfer fee plus all the interest back to the account.

That’s a terrible move if the interest rate is as high or higher than the one you were trying to escape! That’s a definite con.

Do the math, first. Make sure it makes sense in the long run.

Pro: Better Card, Better Terms

If you can get a card with a much lower interest rate, it may be worth the balance transfer fee. Especially if you plan to keep the account long term.

It’s also great to switch to a card that has rewards and no annual fee. You’ll need to do the numbers to be sure it works in your favor.

Think Before You Transfer

Consider the pros and cons of balance transfers. It might look good at first, but you won’t know until you do the math. Look at the terms, fees and future interest rate before you transfer credit card balances.

If you’ll save money, do it! If not, continue to pay down your balances and wait for a better offer.

Are you looking for a personal loan? Contact us for more information, today!