Do a Balance Transfer? 3 Reasons It Might Backfire

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Don’t rush balance transfers without thinking twice.

Key Point

• By making a direct debit, you can make it easier to repay the debt and reduce the repayment costs.
• However, there are drawbacks to doing balance transfers that you should be aware of.
• Fees and higher interest rates may be in place for you.

If you owe money on many different credit cards, you may find it difficult to keep track of all those minimum payments and their due dates. Additionally, some existing credit cards have higher interest rates, making it more expensive to pay off the debt.

If you manage balances on a number of credit cards, you may be interested in proceeding with balance migration. A balance transfer moves your existing balance to one of her credit cards and pays that one of his credit cards each month.

There are distinct advantages to doing a balance transfer. For one, you only need to track your monthly payments. Also, if you have good credit, you may be able to take advantage of the 0% initial interest balance transfer offer.

But balance transfers aren’t always the perfect solution to managing your credit card debt. So before you make a hasty balance transfer, consider these three reasons you might regret the decision later.

1. High fees can get you stuck

Most credit cards charge a fee for transferring balances. And that’s an additional cost you don’t want to incur when you’re already dealing with debt. For a $5,000 balance, you could be up to $250 in delinquency.

2. It can hurt your credit score

Applying for a balance transfer offer means scrutinizing your credit report. Asking one tough question can only lower your credit score by a few points. But if you’re doing the balance transfer in conjunction with other loan applications, it can lead to some difficult inquiries in a row.And it can cause even more credit score damage. there is.

3. Once the introductory period ends, you may be stuck with high interest rates

As mentioned above, some balance transfer offers come with an introductory APR of 0%. In other words, no interest accrues on outstanding balances for a period of time.

It’s a definite perk. However, once the trial period is over, the interest rate on the balance transfer card may skyrocket, so be careful. And if the balance isn’t paid in full by then, it may cost more to reduce it.

Is direct debit right for you?

If you have a high credit score and are tired of making multiple credit card payments each month, consider a balance transfer. However, be sure to do your research before jumping in so you don’t regret your decision. Rather than deal with the hassle and fees of moving balances to a new card, you may prefer to pay your existing balances individually, from high to low interest rates.