Suze Orman’s Simple Rule Helps You Decide Whether A Balance Transfer Is Worth It

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Don’t assume direct debit is the right choice until you read Suze Orman’s advice.

Key Point

• Suze Orman offers advice on many types of money issues.
• She has simple rules to help determine if a balance transfer is worth it.
• Direct debits can help you pay off your debt, but they may not be the right choice if the fees and interest are too high.

Direct debits make it easier to pay off your credit card by lowering interest rates.

Credit card companies try to induce you to transfer balances from one card to another by offering a 0% lead rate on transferred funds. There’s a small fee to move your balance, but lowering the high interest rate to 0% can significantly reduce your repayments.

However, transferring balances is not always the right choice. Personal finance guru Suze Orman’s simple rules will help you decide if you need to transfer your balance.

Suze Orman’s balance transfer rules are as follows:

Orman’s rule of thumb for deciding whether to perform a balance transfer is that if the fees and interest are more expensive than keeping the balance intact, then it should not be done.

First and foremost, Orman emphasizes the importance of considering balance transfer fees when deciding whether it makes sense to transfer balances to a new card. “The balance transfer fee should not exceed 3%,” says Orman.

Most cards charge at least some fee, usually a percentage of the balance transferred. But those upfront costs can vary from card to card, and she says any fees above 3% aren’t worth paying. “I definitely don’t want to pay any more of these fees to send money, so it actually stays on the old credit her card and it costs me to pay it off,” Orman said. increase.

Second, she warns that it’s important to consider the potential interest you may be paying. Specifically, if you still have a balance at the end of the 0% promotional period, the interest on the amount owed may be “extremely high.” As such, you need to know the interest you might end up paying and assess the likelihood that you’ll still have outstanding debt at that point.

Should I listen to Oman?

Orman warns of the dangers of balance transfers that cost you more than you would pay if you left your debt where it came from and focused on paying it off.

Balance transfer fees add upfront costs to your debt service efforts. This may not be worth paying if the fees are too high, or if your existing card is nearly wiped out of debt. If the rate is higher than what you were paying with your old card, you may not save any interest.

You should always do the math and follow Orman’s advice before migrating your balances. The fees and interest you have to pay, plus the cost of moving your balance and the interest you end up with, add up to more than the total cost of leaving the debt unattended. to move forward.