How can people get out of debt while the credit card companies charge 24.99% or more? It is crazy. I was looking at this Bank Rate Credit Card Calculator and calculated that a $5,000 credit card debt at 24% will cost you dearly.
Paying $125 a month it will take you 586 months to be rid of your debt. In that time, you will pay $18,812.72 in interest.
Now the big question is, would it be wise to surf a high interest rate to a low interest rate card through a balance transfer? Well, it depends on a few factors. The problem with opening another low rate credit card is the increase of available credit.
If you transfer your high interest rate balance to the new one, your old one now has a zero balance. If you charge that card back up again, you are in a worse situation than you were before.
Getting the best balance transfer credit cards can be a good idea, if done with wisdom and discipline. Cancel the old card right after the balance transfers over.
Also, don’t delay paying it just because you have 0% for a time. One little mistake, one little late payment will make your 0% disappear right before your eyes and you will wish you had been paying more on it.
Do NOT use your balance transfer card for any new purchases. Some cards will give you 0% on balance transfers but will charge you an arm and a leg for interest on new purchases.
Don’t be under the impression that you can charge something on it and pay it off that month. The way the credit card companies pay off your balance is lowest interest rate to highest.
So you will have to pay off your entire 0% balance before they will apply any money to your higher interest rate purchase.
Sometimes not moving your balance to a lower rate is a good thing. Why? Because paying that interest makes you angry and uncomfortable. That in turn, makes you want to pay it off faster and keeps a fire lit under you. You don’t want to make being in debt comfortable.