Perhaps you have considered consolidating credit card debt to reduce high interest payments and giving yourself a more affordable monthly payment. With high interest rates it may feel as if you are just paying down the interest and not touching the principal balance.
With that reasoning it may seem possible to transfer your high rate credit card balance to a new card with a lower rate. Before you take a balance transfer credit card however, be sure to find the total costs of consolidating credit card debt as you may find a few hidden fees that might make this option not possible.
Credit Card Balance Transfer Fees
Some credit card companies will charge you balance transfer fees. Balance transfer fee is a fee to move your credit card balance from a high interest rate card to a new lower interest rate card. You will need to know how they calculate this fee as different companies apply different methods for calculating it.
There is a flat rate transfer fee, which charge a one time $35 to $45. You may also find companies that charges as high as five percent of the amount that was transferred to your new card. For example, a $1,000 transfer of your balance with a five percent transfer fee that will cost you $50. This is the fees that are added to your outstanding balance on your new card.
Let’s say you don’t want to pay the transfer fee immediately, the credit card company will attach an interest charge to the fee. So when you consolidate credit card debt into a new lower rate card, always remember to check for any other hidden fees.
Other Hidden Fees of Consolidating Credit Card Debt
Some companies allow you to make payments via telephone. But there will be a convenience fee for payment on the phone, which can be as high as $10.00 for a transaction. To avoid being charged such a high fee ask the credit card company for any type of convenience fee.
Reputable credit card companies do not intentionally hide some of the fees for transferring credit card balance. In fact, they are required to show any fees to the consumer before the credit card offer is taken. Just ask them all fees involved in their balance transfer offer.
Is Consolidating Credit Card Debt Right for You?
If you have a large credit card balance the interest charges, late payment fees and other penalties combine the debt increases to threatening proportions within no time. You may try to pay one credit card bill with another one. Unfortunately, this can only increase your debt load at an uncontrollable rate.
By consolidating credit card debt to a new lower rate card you take all of outstanding balances and turn them into a lower debt payments. You will be able to control your debt level, put an end to debt collectors’ harassment and improve credit rating. But before you accept any balance transfer offer make sure the decision to consolidate credit card debt is really feasible.