With a new year comes new resolutions, and while some may be focused on other goals, you might be looking to shed a bit of debt. If you have credit card debt on cards with high interest rates, consolidating those balances to a lower-rate card can make it easier to pay off debt, manage monthly payments and save money.
Consolidating to one low-interest credit card enables you to transfer multiple debts to one account, which means a single payment at a lower rate. It makes payment simpler since you’ll have only one credit card bill per month. Before you make a move, consider the following:
- Check your credit report ahead of time as a higher score may qualify you for the best promotional rates.
- Transferring to a low-interest credit card that offers an introductory rate can lower payments, but be aware of how long the promotional rates last. If it’s a short-term promotion rate, the interest may end up jumping to a level higher than what you currently pay before you pay off your debt. You’ll save the most by paying off the debt completely under the lowest interest rate.
- Transfer fees could cancel out any savings you’d get from a lower-interest card. Be sure to read the fine print and learn how much it would cost to transfer balances. Navy Federal doesn’t have balance transfer fees on any of their credit cards.
- Transferring balances frequently may impact your credit score.
Alternatives/Supplements to Consolidating Your Cards
Transferring credit card debt isn’t for everybody. Here are a few alternative methods to paying down debt—and some ideas for making sure they stay down:
- Pay off the cards with the highest interest first. You have to make payments on all your cards, but paying off the high-interest debts first could help you save on interest. Put more money toward your payment as you’re able; even an additional $5 per payment will help toward paying off your interest.
- Consider using your debit card instead of your credit card. Relying on money currently in your checking account will encourage you to stay financially responsible.
- Once your credit cards are paid off, it may be tempting to shred them and cancel your accounts. Resist the urge. This may negatively impact your credit score. Instead, hang on to the cards, but charge only what you can afford to pay off each month.