If you have a credit card with a high interest rate, paying it down can feel overwhelming. How do you gain control of your finances and make a plan to pay off debt?
The key to eliminating your debt is by using the debt snowball method. The debt snowball method is designed to keep you motivated by first focusing on your quicker wins– paying off your debt with the lowest balances and using that momentum to pay off your remaining debt.
Some financial freedom seekers make credit card balance transfers a part of their debt snowball plan. Read on for tips about credit card balance transfers and how to successfully incorporate that into your plan to become debt-free.
What is a credit card balance transfer?
A credit card balance transfer does just what its name implies — it transfers the balance on a credit card or credit account to another account. You can move your higher-interest balances to one credit card with a lower interest rate to help you save.
Transferring is NOT the same as repaying. A credit card balance transfer is different from paying off your credit card debt. Just because your credit card statement says "zero" doesn't mean you're out of debt. Credit card balance transfers are just that, a transfer. The amount you owe on Credit Card A is reassigned to Credit Card B.
Benefits of credit card balance transfers.
Save on Interest: If you've been dealing with high interest rates on your credit cards or other accounts, moving that balance to a lower interest rate can help you save money. Keep in mind that some credit cards may have balance transfer fees. With the FAIRWINDS Cash Back Visa® Credit Card, there are no balance transfer fees.
Simplified Payments: You can streamline your credit card payments by transferring all your balances to one card, as long as the total balance is within your credit limit. This makes it much easier to pay off your debt in one place, with only one statement and one payment to worry about.
Special Introductory Offers: Many balance transfer offers have a specific time frame where you can receive a promotional offer of 0% APR (Annual Percentage Rate) or other low-interest rate. This can motivate you to pay off your debt as quickly as possible within that time frame.
Review Your Interest Rate: When you're moving your balance to a new card, check the interest rate, especially after an introductory period. Make sure you’re moving to a card with a lower APR than your current one.
How to make the balance transfer work with your debt snowball plan.
List Your Balances: Once you've transferred your credit balances to one card, identify and list all of your outstanding debt balances from smallest to largest. This can include auto loans, student loans, and now your consolidated credit card balance. Remember that your mortgage payment is not included as part of your debt snowball.
Pay the Smallest First: Regardless of which balance has the lowest rate, always pay off the smallest balance first in your debt snowball. Once that's paid off, starting paying down the next smallest balance. This can help you keep your momentum rolling as you pay off each outstanding balance.
Find out how much you could save by exploring the best balance transfer credit cards from FAIRWINDS. By making a balance transfer a part of your debt snowball plan, you’ll be well on your way to become debt-free.