If you carry a balance on your credit card, you are almost certain to save money by transferring your higher rate balance to a card with a lower interest rate. With credit card interest rates sky-rocketing recently, you may be wondering what you can do to protect yourself and your money. It’s true that credit card issuers are under the gun with the new credit CARD act of 2009. The good news is that credit card companies are still interested in obtaining new credit-worthy customers and many are offering sweet deals to do so. By doing a little shopping around and comparing the credit card balance transfer rates available right now, you may be able to save yourself hundreds or even thousands of dollars a year.
Varying studies indicate that the average household carries nearly $11,000 in credit card debt on credit cards with average interest rates of around 14%. Lowering your APR by even 5% on that amount would mean an annual savings of almost $600. Taking advantage of a 0% balance transfer offer would save more than $1,500 in the first year. It’s important to keep in mind that many of these balance transfer offers come with a one-time fee attached, usually around 3 to 5% of the total, but even with the fee, the amount you can save is significant.
Let’s take a look at three scenarios where credit card holders can save money by transferring a balance to a lower rate credit card.
- A card holder with a balance of $10,000 and an APR of 12% would save $1,268 in the first year by transferring his balance to a 0% interest card.
- A family with two cards totaling $15,000 and an average APR of 17% would find their annual savings to be $2,758 if they transferred their balances to a 0% interest card.
- A couple whose combined credit card debt is $18,000 and who pay an average APR of 25% on their cards would realize a savings of more than $5,000 a year in interest by completing a balance transfer to a 0% interest card.
In all of these scenarios, you can see that the average savings is significant – even considering any balance transfer fees. Suppose these individuals found a balance transfer offer that lowered their rates by only 10% each, their respective savings would still be $1,066, $1,674 and $2,159 per year! So, as you can see, it pays to research your options and shop around for a lower interest rate credit card. The savings you can experience by transferring your balances could be a pleasant surprise.
Just don’t wait too long to get started with a balance transfer. The new credit card laws may lead banks to decrease the length of 0% balance transfer offers, making the balance transfer option less valuable.
-Jennifer Davide
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