Credit card balance transfers can be a great way to lower your interest rate and pay off debt faster. However, they also come with some drawbacks that you should consider before making the decision to move forward. By understanding all of the drawbacks associated with credit card balance transfers, you can make an informed financial decision that is best for you. 

When considering making a credit card balance transfer, it’s important to consider how long you plan on having debt in order to determine whether or not such a move would be beneficial in the long-term. Most providers offer promotions that include low interest rates, or no payments, for anywhere between 6 months to 2 years. After this promotional period ends, regular interest rates will apply, and regular payments must begin being made otherwise penalties start accumulating at alarming levels. 

KEY TAKEAWAYS

• consider how long you expect to carry the debt                                                                            
• be careful not to use balance transfers as ATM machines
• know the interest rates/fees once the promotional period ends

One potential drawback of transferring a balance from one credit card to another is that it could temporarily bring down your overall credit score. The score will eventually go back up once the new loan has been paid off, but in the interim period, it may cause problems when trying to get another type of loan or other types of financial services approved. 

Another consideration are the fees associated with a balance transfer. Many banks charge a % on each transferred amount and this fee can add up quickly if transferring large amounts of debt from multiple cards. Additionally, depending on the provider, you may have to pay an annual fee once the promotional period ends– which will further increase your overall cost of borrowing money.

It is important to keep in mind that using balance transfers for paying off debts is not necessarily going to solve all of your financial problems. If you have accumulated other types of debt in addition to credit cards, such as student loans or medical bills, then this approach might be a temporary band aid and not an effective long term solution. 

Another potential issue with a credit card balance transfer is that lenders often charge fees and high interest rates once the promotional offering period ends. This makes it important to research different companies so you can assess which ones offer the best terms and conditions before committing yourself to a balance transfer you may regret. 

An additional risk is getting into too much debt. A frequent mistake people make when transferring balances between cards is not reducing their spending. It is easy to end up continuing to accumulate more debt even after transferring existing debts over. It’s therefore important that you have a clear plan in place before making a balance transfer– don’t use it just because you think you will have more money to spend.

Also take note if any specific introductory or promotional offers become invalidated due to late payments or payments being missed which can result in an immediate high interest rate on your outstanding balance.

Final thoughts

A credit card balance transfer can be a way to reduce high interest payments and manage debt more efficiently. However, it is important to weigh both the potential benefits and drawbacks in order to make an informed decision about whether or not a balance transfer is suitable for your situation. With proper research and careful consideration, you should be able to make the best financial decision for yourself and your family. If you find yourself struggling with credit card debt, or any unsecured debt, you can always contact Progressive Debt Relief 877.590.1847 for a free consultation.