Why Should You Transfer a High Interest Credit Card Balance to a Low Interest Account?
The idea of transferring your credit card balance from one account to another is not a new concept. It has been around for a very long time, and there is a very good chance that you have either seen advertising for it or you have done a balance transfer yourself at one time. If you have never done a balance transfer from a high interest credit card account to a low interest account, you may want to consider it the next time you get the opportunity. There are several reasons why it is a good idea to do a balance transfer, but there are a couple of very good reasons as to why you should consider doing this the next time you get an offer for it in the mail.
When you cut your interest rate by doing a balance transfer from a high interest credit card to a low interest credit card, you are reducing your overall interest debt and saving yourself a lot of money. When a credit card company figures out how much you owe in interest, they take your existing balance and use their interest rate to figure out how much in interest you will be paying that month. If your current interest rate is 19% a year then you are more than likely paying more in interest every month that you are in principal. That means that if you pay $100 a month to your credit card, it is possible that at least $51 is going to interest. If you were able to find a low interest credit card that cut your interest rate to 10%, then that same $100 payment now goes more towards paying off your existing balance than paying interest every month. By reducing your interest rate, you can apply more of your monthly payment to paying off the principal that you owe and stop putting so much of your monthly credit card payment towards interest.
A lower interest rate also means that you are lowering your monthly minimum payment. Everyone knows that you should try and pay more than your monthly minimum payment on your credit cards, but on those months where money is a little tight it can be very helpful to cut your credit card payment by reducing your monthly interest rate. It is always helpful to reduce your monthly minimum payments on all of your existing debt just in case you find yourself a bit short on funds for any given month.
If you are transferring multiple high interest credit card accounts to one low interest credit card account then you will see a huge savings on your monthly payments. Your multiple payments all carry their own service charges and they all figure their own interest payments. When you do a balance transfer to one low interest credit card account, you are now only paying one set of service charges and one low monthly interest payment. You could potentially knock hundreds of dollars a month off your monthly bills by doing a balance transfer of all of your high interest credit card accounts to one single low interest credit card account.