Is your accumulated credit card debt getting out of control? Are you tired of having payments with high interest charges month after month? Do you want to get ahead of your debt? If you’re tired of having extra money tacked onto your credit card balance because of credit card interest rates, and you want to do something about it, now may be the right time to consider finding a way to lower that interest rate and start gaining momentum in paying off that balance. One thing you can do to lower your interest charges and work towards eliminating your credit card debt is a balance transfer.

Carrying balances on a high APR credit card can negatively impact your cash flow for a couple reasons. First, it means you’ll be paying a higher monthly payment on the money you borrow, adding to that monthly credit card bill. Higher bills mean restricted cash flow. Second, none of the money you are paying in interest goes to paying off your balance, adding to the overall length of time it will take you to pay it all off. The longer you continue to pay high interest on your balances, the more money you’ll have spent overall just in interest. That’s money that you could have used elsewhere.

This is where a balance transfer comes in. A balance transfer is when you take the outstanding balance of one card that has a high interest rate and transfer it over to another credit card that has a zero percent interest rate. The interest rate is displayed as the APR of the card, or Annual Percentage Rate, and can range all over 0% for very low and can climb into 25% or higher territory. Initiating a balance transfer allows you to pay back the outstanding balance without having to worry about it increasing drastically each month with the high interest rates of the original credit card.

Let’s walk through a short example. Say your current credit card balance is $5,000 and you’re paying 15% in interest monthly on that balance. If you want to pay it off in a year, your monthly payment would be around $479 and you’ll wind up paying about $393 in total interest over that period.

If you move the $5,000 balance from credit card A with the 15% APR and you transfer it to a new credit card B with a 0% APR, your monthly payment to pay off that $5,000 balance would be roughly $416 and you’ll have paid nothing extra in interest on that balance. This simple maneuver could save you hundreds of dollars. In this case it’s $393.

When you transfer your balances to a lower APR card you can lower your monthly payment, pay less in interest over time and pay that balance off much faster. It’s a good debt reducing strategy.

If you’re ready to transfer your balance and lower that monthly payment, there are a few things you need to be aware of.

1. Be aware if the low APR is a promotional rate, how long that rate will last and what happens when the promotional period ends. Very low interest rates are usually temporary and after the promo period expires, typically adjust to a different rate. It’s important to take note of the promotional period and how much you’ll be able to pay off before it ends. If your balance hangs around past the expiration date, your interest rate may adjust and most often, to a higher interest rate.
2. Check if there are any balance transfer fees. Some cards will charge you a percentage or a fee to transfer your balance. Make sure you keep this in mind because it will be an added cost to you. If you want to save some money on a balance transfer, there are some credit cards out there that do not charge a fee. Check out cards like Triangle’s Premier Advantage and Membership Rewards credit cards which do not charge a balance transfer fee at all.
3. It’s important to pay attention to any other fees or charges the card may have. A low intro APR may be great but if there are other features of the card you’re interested in using, make sure there are no other fees or APRs associated with those features because that might put you back into a situation you don’t want to be in if you’re not prepared for those.

Doing a balance transfer is a smart first step in working to pay down your credit card debt. If you need help calculating how much certain rates may charge over time, we have a free calculator on our website that will show you how long it will take to pay off your balances and how much interest you can expect to pay.