Money Matters: Smart ways to use balance transfers

April 28, 2017 01:30

Sponsored by NEFE

About a third of people with high credit scores have credit card debt between $5,000 and $15,000 dollars. Another 20 percent have more than $15,000 on their cards. Those cards carry interest rates anywhere from 13 to 25 percent or more, which means interest charges can keep piling up the longer you hold a balance. And with the Federal Reserve gradually raising rates, the adjustable rates on your credit cards will go up, too. But one way to combat interest is to look for credit cards that offer low rates for transferred balances. Some even offer zero percent interest for a set period of time, before a normal rate kicks in.

As Consumer Reports outlines, you should shop around for cards that offer low promotional rates, especially when you are confident you can pay off the entire balance within the promotional period. Be aware that some cards that offer balance transfers will charge a flat fee or a percentage, whichever is greater, to make the transfer. Financial advisors say when choosing which balances to transfer, try to pay off those with the highest interest rates first. And it's important to make the payments on time, because missing even one payment could end your promotional rate immediately and tie your entire balance to a higher rate.

To help your viewers/readers/listeners understand the advantages and disadvantages of balance transfers as a credit management strategy, talk with credit counselors in your market. They can come up with some sample scenarios to demonstrate which approaches will save the most money in the long run, and can explain the pluses and minuses of using debt consolidation to help pay off balances in full.

Sponsored by the National Endowment for Financial Education
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Stephanie Zimmermann and Cho Park of ABC News entered the 2016 NEFE/RTDNA awards contest with their ongoing series of personal finance and consumer stories titled The ABC News Fixer .