One of the best ways to save money as you work to pay down debt is to use a balance transfer. A balance transfer can help you put more money toward your debt's principal, allowing you to pay less in interest. When you aren't paying interest, your debt is reduced faster.
There are a number of credit cards that offer low balance transfer rates. When you are only paying 2.99% on a credit card balance, more of your payment goes toward the principal, which is an improvement over paying 15.99% -- or more -- on your debt. It is even possible to find a Canadian credit card, like the Platinum Plus MasterCard from MBNA, to help you pay down your debt even faster.
Some of the things to pay attention to when evaluating balance transfer offers include:
- Introductory rate: What interest rate will you pay. Balance transfer credit cards usually range from 0% to 5.99% when it comes to introductory.
- Introductory period: Next, find out how long you will receive the introductory rate. The longer the into period, the better. You will have more time to pay down your debt at the low rate. Be aware, too, that sometimes the purchase APR intro period is different from the balance transfer period. You might get 12 months for your balance transfer, but see the regular rate on purchases after 6 months.
- Balance transfer fees: Realize that there might be a balance transfer fee. Normally, this is a percentage of the total amount you transfer, usually between 1% and 2%. Add up the fee to see if it is worth paying. Most of the time, it usually is.
- Regular rate: Find out what your regular rate will be after the intro period ends. This is a good way to prepare for what's next.
- Other card features: Your Canadian credit card might also have other features. Look at rewards, other fees, and try to avoid an annual fee.
Once you're done with the balance transfer, try to pay down your debt as quickly as possible. The best situation is when you are able to pay off your debt before the regular rate takes effect.
Check out the following infographic to learn more about balance transfers. And don't forget to check out other infographics in our gallery.
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This post was included in the Carnival of Financial Camaraderie at My University Money.