If you feel like you're already drowning in credit-card debt, the Federal Reserve's plan to increase interest rates twice before 2018 is over isn't welcome news. Credit-card holders could be seeing the first of these rate hikes reflected in their interest rates as early as next month.
If you're carrying balances on your credit cards, an interest rate hike is only going to increase those balances. The average rate on variable-rate cards is already over 17.3 percent.
One strategy to deal with these ever-increasing rates is to get a balance transfer credit card. These cards have a low introductory rate of 0 to 5 percent. That rate may be fixed for 12 to 18 months.
If you can pay off the balance within that introductory period, you can save yourself a lot of money in interest. It may be well worth the cost of the balance transfer from your high-interest credit card(s).
It's important to shop around for the best card to transfer your balance(s) to. Ideally, you'd like one with 0 interest and a long introductory period. What you qualify for depends in part on how good your credit is. It's also best if you can find a card that will allow you to transfer your entire balance.
Finally, note the amount you'll have to pay to make the transfer. This could be 3 to 5 percent of the balance you transfer.
Once the introductory period is over, if you still have a balance, you'll start being charged interest. Therefore, it's important to keep an eye on what that card's interest rate is.
Transferring your credit-card balances to a new interest-free or low-interest card may seem like you're getting a fresh start. However, if you're not able to pay off your balance in the introductory period, you could be back in the same situation you're in now.
If you're facing overwhelming debt, it's wise to explore all of your options to determine how best to manage it. An experienced Colorado bankruptcy attorney can provide valuable advice and information.