Beating Debt with Credit Card Balance Transfers

     Before I get too deep into this one, I should make it perfectly clear: The best thing you can do to handle your debt, of course, is to pay off your credit cards in one lump sum and make sure you have a zero balance going into each new month. Yeah, I know. It’s a bit lofty for most of us, but paying down your debt in its entirety is the only real way to avoid interest and finance charges. Living within your means and spending less than you make is the best path to staying free of credit card debt, period.

     Once you’re in the hole, though, saddled with thousands of dollars of credit card debt, it can seem nearly impossible to dig your way out. Unfortunately, I’m speaking from firsthand experience on this one. All the same, there are options to consider that are not bankruptcy, and believe it or not, balance transfers pave the way to one such road out.

     Assuming you’ve already called your credit card provider and asked them to lower your rate, the next step is to begin shopping for another card that offers something better than what you’re getting. If you have $10,000 on a card at 19.9% APR, you’re staring at about $2,000 a year in finance charges alone. Cut that rate to 8.9% with a new card, and you could be saving enough to make an extra mortgage payment or buy yourself a trip to Hawaii. Well … Florida, at least.

     Another good option -- which I’ve outlined in greater detail in my article Pay No Interest On Your Credit Card Debt...Okay -- is shifting your balance between cards with introductory rates. Some providers offer cards with 0% interest for a year, some don’t go quite so far, offering rates like 5.9% for periods of six months or more. Take that same $10,000 debt and an original APR of 19.9%. If you’re able to make a couple of transfers and pay no interest on that debt for two years, you’ll save nearly $4,000. The trick with this approach is to know when the promotional rates expire and to make yet another transfer before that happens; if you get caught paying an exorbitant rate for a moth or two after the promo has ended, you can pretty much ruin the whole effort.