The balance transfer promo rate is the main reason why people opt to use this as a debt consolidation strategy. The truth is, it is really effective. If your credit card interest rate averages at 17%, the promo rate of the balance transfer card can remove this. Even if you have to pay the transfer fee of 3% of the balance, it will still help you save a lot of money. The promo period usually lasts for 6 months to more than a year. The 0% interest rate will really help you save money on your payments.
Unfortunately, a lot of people fail to realize how balance transfer can help them conquer their debt situation. A survey revealed that 47% of respondents have never tried balance transfer credit cards. It was not indicated why these consumers did not use it. However, it is clear that they are really missing out on a huge opportunity to improve their finances.
Of course, this will only happen if you know how to use this properly. To maximize the benefits of this debt solution, you need to take advantage of the balance transfer promo rate. Make sure that you can pay off all your debts before it expires.
But what happens if you cannot pay off everything before the promo ends?
Your balance transfer card will return to its original interest rate – and you can bet that it will be a high-interest rate.
What to do when the balance transfer promo rate expires
In case your balance was too big to completely pay off during the promo rate of your balance transfer card, that is okay. You can still save money on your debt payments as long as you move quickly. If not, the high-interest rate will be increasing your monthly debt payments.
So what should you do now that the balance transfer promo rate ended? How can you keep it from ruining your progress?
Check how much balance is left
The first thing you should do is to check how much balance is left. Evaluate the progress you have made during the promo period. How much have you paid off? This is actually a great time to motivate yourself. When you see how far you have come since you started using the balance transfer strategy, it will make you feel like debt freedom is possible. You can go ahead and give yourself a reward – as long as it will not cost you too much.
As long as you focus on the progress, you can stay positive despite the balance that you still have to pay. You will feel encouraged to keep working on your debts after the progress that you have made so far. Not only that, the amount of debt remaining will give you an idea of what to do to completely get yourself out of debt.
Determine if you will keep the balance with the same card
Obviously, you need to decide how to pay off the remaining debt after the balance transfer promo rate expires. If your balance is only small and will only take 2 to 3 payments to complete, then you can probably leave it where it is. Just make sure to calculate how much the new high-interest rate will affect your monthly payments.
However, if you still have a huge amount of debt to pay off, it might be best to consider another debt consolidation strategy. The high-interest rate of the balance transfer card can waste all the savings you got from the 0% promo rate.
Borrow a loan to pay it off
One of the options that you have is to get a debt consolidation loan. If you paid your monthly dues properly during the balance transfer promo, you should have been able to give your credit score a boost. This will help you qualify for a low-interest loan. While it may not be as good as a balance transfer promo rate that just expired, it should be enough to still help you save money.
Opt to open another balance transfer card
If you are not open to the idea of using a loan to consolidate your debts, there is also the option to use another balance transfer card. Of course, you should get it from another creditor and not the one that just ended. That way, you can benefit from another 0% interest rate. If you have a good credit score, you may even get a better deal than the one that just ended – like a longer promo period.
Tips when using a balance transfer card
While this debt solution is effective, you need to follow certain rules. Despite the balance transfer promo rate, it is possible for you to make mistakes. To avoid that, here are some tips that you can follow.
Do not use it for new purchases
First of all, be strict with your use of the balance transfer card. The promo rate is usually just for the transferred balance. If you use the card for new purchases, that will have a high-interest rate. And with the way things are going, that is not something that you want to add to your current financial position.
According to reports, the wages have not caught up with the high cost of living. That means people are most likely to use their credit cards as a fallback. While it may be hard to avoid this, you need to make a decision to lower your monthly expenses. Instead of burying yourself further in debt, find ways to spend less so you do not have to be forced to use your credit cards – especially your balance transfer card.
Be careful when using another balance transfer
In case you decide to use another balance transfer account, you have to be careful. You have to remember that this is another credit card. It will result in a hard inquiry. That can pull your credit score down. It will also mean another balance transfer fee. So consider the costs of the transfer before you consider this as an option.
It is also important for you to learn your lesson as you pay off your debts. Although balance transfer is effective, you might feel like it is an easy fix. But the truth is, it is not. You need to deal with the reason that you are in debt. If it is overspending, you need to do something about your lifestyle. If it is an emergency, you have to give your emergency fund a boost. Once you have dealt with the cause of your debt problem, it will be easier to maintain the debt freedom that a balance transfer can help you achieve.