According to Lending Tree’s latest analysis, credit card interest rates now average 23% and only expected to go higher this year. If your credit card interest is high and you have a plan in place to get it paid off over the next 12 to 18 months, you may want to consider looking into getting a zero-interest introductory rate credit card and do a balance transfer to save some interest. I listed a few options you may want to consider below.
However, if you go this route there are 4 things you need to be completely aware of:
- Opening a new credit card is going to hit your credit score. This is fine if you don’t have any current needs for other loans. Just be aware that your score will take a dip.
- Review the terms to see if there is a balance transfer fee. Many companies will charge 3% to 5% of the amount being transferred.
- Review the terms to see if there is a clause that states if you make one late payment, the zero-interest promotional rate goes away.
- Do not charge anything else on that card!!! Anything beyond the amount transferred, in most cases, is charged the full interest and any payment you make goes towards the zero-interest portion, meanwhile, the high interest portion continues to accrue.
If you go this route, do not close out the card you paid off. Doing so will adversely affect your credit score because the average “depth” of your credit (meaning how long you’ve had credit) will drop. It would be like having a job resume and the only jobs you show are the ones that were temporary. Credit algorithms like to see long histories.
