Can balance transfers backfire?

The average American had $6,354 in credit card debt at the end of 2017 which continues the upward trend of recent years, and many people might be looking for a balance transfer after overspending during this year’s Christmas shopping season.

The benefits of a good balance transfer card are that a person with existing high-interest credit card debt can get as low as zero percent interest rate for up to 21 months. That can allow them to focus on the debt itself without worrying about interest charges slowing them down, according to The Simple Dollar.

Without proper preparation, however, balance transfers can backfire.

Balance transfers still require work and sacrifice to totally clear the debt. Bad spending habits and a lack of budgeting probably created the debt in the first place. Transferring a balance might save you interest, but it won’t save you from bad habits.

One of the worst things to do is continue to use an old credit card while trying to pay off a new one, racking up even more debt in the process.

This includes falling into the trap of wanting to use the credit card to access the rewards for things like presents for the family at the end of the year – they are not worth it if there is a balance at the end of the month.

The only way to clear out debt with a balance transfer is to divide the total balance by the number of interest-free months. That is the monthly payment you must make to ensure your profit from the balance transfer.

This payment will likely be much higher than the minimum required, but paying only the minimum amount will not make much progress toward total payoff.

You’ll get the best deals on a balance transfer with a great credit score. The best scores can attract offers of zero interest for close to two years.

A strict monthly budget can help carve out extra money to pay down debt. Focus on absolutely perfect payments to increase your credit score.