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Doing a Balance Transfer? Pay Attention to This Key Detail

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As of the fourth quarter of 2023, U.S. credit card balances sat at $1.05 trillion, according to TransUnion. So if you’re carrying a balance yourself, you’re certainly not alone.

The problem with credit card debt, though, is that the longer it lingers, the more interest you could end up accumulating. And that could make your debt very costly.

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Let’s say you owe $5,000 on a credit card charging 18% interest. If it takes you three years to pay it off, it’ll cost you $1,507 in interest. If you end up needing four years to pay off your balance, it’ll cost you $2,050 in interest.

Tip: You can use a credit card interest calculator to figure out what your balance will cost you based on your payoff window.

That’s why it’s in your best interest to try to pay off your credit card debt as quickly as possible. And you may decide to do a balance transfer to make that process easier.

If you move your existing credit card balances over to a new card with a 0% introductory rate, you’ll get a break from racking up interest for a period of time. That could make it easier to dig your way out of that hole. But if you’re going to do a balance transfer, there’s one important detail you’ll want to be mindful of.

See how long your introductory period lasts

Balance transfer cards usually give you a limited period of 0% interest. But the length of that period can vary substantially from one card to the next. So it’s important to pay attention to that specific detail when choosing your balance transfer offer.

Some balance transfer cards, for example, give you 0% interest for only 12 months. But you may find a card that gives you 0% interest for 18 or 21 months. The more time you get without accruing interest, the greater your chances of being able to whittle your debt down to $0.

But be warned — once your introductory period comes to an end following a balance transfer, the interest rate on your remaining balance could soar. So it’s actually really important to try to pay your balance off by the end of that introductory window.

A personal loan may be a better bet

While a balance transfer might offer you a limited-time reprieve from accruing interest on an existing balance, if you’re not convinced you’ll be free of your debt within that timeframe, then you may want to look at a personal loan instead. Note that a personal loan won’t give you 0% interest for a limited period of time. You’ll automatically sign up to pay some amount of interest with a personal loan.

However, the upside is that you might pay a lot less interest on a personal loan than on a credit card. And knowing your interest rate on that loan is fixed could help you tackle your debt with less stress.

In fact, it’s important to be realistic about your time frame when you’re looking at paying off debt. If you don’t think you can get rid of that debt within a given credit card’s intro period, then a personal loan may be a better choice.

You can always try to pay off that personal loan ahead of schedule, to potentially minimize the interest you pay on it. But that way, you won’t run the risk of going from 0% interest on your debt to a really exorbitant rate that keeps you trapped in that unwanted cycle.

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