Should You Refinance Your Credit Card?
Getting the Right Rate Can Save YOU Thousands
A credit card debt can be like the worst sort of trap. Like a wound that won’t heal, a monthly minimum payment – with ceaseless regularity and endless strain on your budget – leaves your account. It’s to pay for the Christmas shopping, or the last July 4th party, or your holiday two years ago. You don’t know; frankly you care less – you just want to see it gone. But when your next statement arrives, the hole your minimum payment should have burned in your debt is no smaller – the sore remains unclosed.
Is this situation familiar? Is it you?
If it is, you’ve not heard the worst of it yet. The way that credit card companies exist and thrive is by exploiting your debt burden. They’ll lend and lend and lend, until you get to the point that the most you can pay back each month is the minimum payment – usually around 2.5 per cent of the balance. The problem with this is that they hit you with a load of interest, sometimes amounting to 2 per cent of the balance. If only one half of a per cent is being paid back it doesn’t take much math to figure out the amount of time it could take you to pay back your debts.
In fact, if you’re paying repayment insurance, in some instances you can pay back less than the amount of debt accumulating.
It’s a horrible, self-perpetuating cycle of hemorrhaging money, but the good news is twofold.
First off, you’re not alone. Thousands upon thousands of decent, hard-working Americans are in this position through no fault of their own but necessity and the demands of modern living.
Secondly, if you’re stuck in this horrible cycle of bleeding money, the chances are that it can be at least partially redressed. Many Americans have – and still do – unwittingly signed up to credit card deals that are uncompetitive, over-priced and unnecessarily expensive. What many don’t realize, is that simply because you have pledged allegiance to a particular credit card company doesn’t mean to say that you are stuck with them for life. There’s a way out that can save you hundreds, if not thousands of dollars a year and help you pay off your debt burden more quickly.
Transferring the balance of your credit card to another one is a way of paying off your existing debt with a new credit card that you take on at a cheaper rate. In many cases this can be set at 0 per cent for a period of a number of months, before reverting to a higher rate. By switching to such a card – and then another at the end of the interest free term, and maybe even another after that, it gives you a clear run at reducing your debt, without it spiraling ever further upwards. Even if you’re still only paying 2.5 per cent off the balance a month, far better to do that than knocking off one half of a per cent, or less.
By bundling up the old expensive credit card debt, getting rid of it, then paying back the new credit card at a lower rate, you can save countless dollars each month. You can save even more money by paying a bit more each month, thus clearing the debt in a shorter time. By doing this you’ll free up more dollars further down the line enabling you to spend them on something really nice.
Unfortunately, 0% deals are not always available to all customers. If you’ve got a credit rating that’s in some way below scratch, it is probably unlikely that a 0% credit card will be made available to you. It’s a sad fact of finance that the best deals seem to always be available for those who need them the least.
That said, there are a number of other excellent credit cards on the market through which you can save many dollars. Even if a balance transfer rate is as high as 10 or 12 per cent, if you’re paying upwards of 20 per cent on your existing deal then you’re clearly going to save a stack of money – even if it’s not as much as you might have liked.
If you’re concerned about how much you’re paying each month on your credit card repayment it certainly pays to check out your existing interest rates and compare them to some of the balance transfer rates available at competitors: it’s almost a certainty that you’ll save yourself more than a few dollars.
Even if you’re not worried about your existing credit card deal, it’s worth checking out the market to see if you can get a better deal. Complacency doesn’t pay, but a bit of awareness can save you a lot.
Ethan Hunter is the author of many credit related articles. If you are looking for help with Home Loans or any type of credit issue please visit us at http://www.creditcardunlimited.com
Written by: Ethan Hunter