PGCFCU Blog

High-interest rate credit cards and loans can make it challenging to achieve your financial goals. The high cost of borrowing money can require that you delay plans to build an emergency fund, buy a new home, or start saving for retirement. When you can only afford to make minimum required payments, it can take years before you see significant changes to your account balances. That’s because the majority of your minimum payment gets applied to interest charges, which are compounding monthly. So, the last thing you’re considering is a new credit line.

But, a new credit card, with a lower interest rate, can help you save money and pay off debt quickly. When you transfer current high-interest rate debts to a new card, you might improve your finances since more of your monthly payment is applied to the principal balance.

Credit card balance transfer offers vary by issuer, and there’s no single offer that makes sense for every situation. So, before you transfer your high interest rate balances to a new credit card, consider these four questions to help decide if doing so will save you money.

1. Do I have a debt reduction plan?

   Transferring your account balances to a new credit card isn’t the same thing as paying off the debt. You must still repay the principal amount, and sometimes additional transfer fees. Without a plan to pay down your debts over the long term, moving debt to a different credit card could provide temporary budget relief but not a solution to financial troubles.

   A debt reduction plan defines how and when debt balances will be paid in full. It requires making more than the minimum required payment and identifies sources of additional income or ways to cut expenses so more of your budget can go toward debt reduction. Without a plan, a balance transfer can save you money but may have less of an impact.

2. Will the interest rate change after the introductory period?

   Credit cards with a balance transfer option usually offer a low-interest rate during the first several months to entice you to make the transfer. When you have a debt reduction plan, you can take full advantage of those low introductory interest rates. For example, Prince George’s Community Visa Elite Rewards® and Visa Platinum® cards offer an initial balance transfer APR of 2.99% for six months. After that, the standard balance APR applies. The new rate is based on your creditworthiness and may be as low as 8.99%. Other credit card issuers may revert to higher standard balance APRs after the introductory period.

   Enter the balances and APRs for each of your credit cards into a Debt Relief Calculator to see the potential savings that may be available after the introductory period ends. Be cautious not to transfer your debt to a credit card that will potentially have a higher APR than the one you currently pay.

3. What are the fees?

   Many credit card balance transfer offers require cardholders to pay a transfer fee, sometimes 3% to 5% of the total transfer amount. Some credit cards, like Prince George’s Community Visa Elite Rewards® and Visa Platinum®, have no balance transfer fees and no annual fees. Be sure to identify all of the fees associated with owning a new credit card.

   Tally all fees to figure out the total cost and decide if the balance transfer makes financial sense.

4. How much can I transfer?

   If approved for a new credit card with a balance transfer option, some credit card issuers may limit the amount you may transfer. Some balance transfer credit cards, like Prince George’s Community Visa Elite Rewards® and Visa Platinum®, allow you to transfer up to the approved credit limit. If you’re unable to transfer all of your high interest rate debt, you might still experience cost savings on the amount transferred.

It’s possible to save money by transferring your high-interest rate debt to a lower-rate credit card. A balance transfer can put you back on track to achieving your financial goals. Keep more money in your pocket when you apply for a Prince George’s Community Federal Credit Union credit card. We likely have a low-interest rate balance transfer option that’s right for your finances. Complete the Credit Card Balance Transfer Form and email, fax, or deliver to one of our friendly branch locations today!