If you have a big credit card balance, it can be frustrating if you find yourself in a position where you are unable to pay it off. In an effort to pay more toward their principle and less in interest, some people opt to do a balance transfer in order to pay off their debt more quickly.
With a balance transfer, people move their high interest credit card debt to a credit card with a lower interest rate with the intent to pay off the balance before the regular interest rate kicks in. If you have excellent credit (a score between 760 and 850), it can be as low as zero percent for the course of the introductory period.
If you’ve opted for the balance transfer route and were unable to pay off your balance before the end of the introductory period, it’s important to understand why your balance transfer didn’t work.
Here are some questions to help you assess your personal situation:
- Did you make other purchases with the card? If so, then you increased your debt while trying to pay it off.
- Did you pay less per month than you intended? Your monthly payment should be the amount owed (including the transfer fee) divided by the number of months in the introductory period. If your monthly payments were less than the amount you calculated, then you couldn’t possibly pay the debt down before the intro period ended.
- Was your balance such that it couldn’t be paid off during the introductory period? If this is the case, and you don’t think you can pay off your debt within the next three to four years, you might think about talking to a credit counselor to get some direction.
Before you can make a new plan, you need to determine the amount you have left to pay. How much credit card debt do you currently have, and what’s your interest rate?
With most major credit cards, you’ll only pay interest on the amount left. But there are other credits cards that may charge interest based on the original balance. Be sure to read the terms and conditions carefully for your card to know how interest is calculated.
Pick a new plan
If the remaining balance and interest rate are fairly reasonable, you might consider setting new a target date. For instance, if your balance is $1,500 and your APR is 14 percent, and you decide to pay off your debt in one year, you’d pay approximately $135 monthly, which would include interest of approximately $117.
If your debt is considerable or your interest rate is high, you may want to consider another balance transfer card with a zero percent introductory APR.
If your credit score has been negatively impacted, then you might not qualify for the best offers. But if you have relatively good credit, you might be able to get a balance transfer card that offers an intro APR that’s lower than the one you currently have.
Consider credit counseling
Regardless of your situation, it may not hurt to speak with a credit counselor. Most reputable counseling agencies offer a free phone consultation to assess your situation. This might be enough to get you on the right track.
However, during your initial phone assessment, if it is determined you need further consultation, you will receive advice on how to proceed. In addition, you can also visit the National Foundation for Credit Counseling website to find an accredited agency.
TIP: Prior to speaking with any credit counseling agency, the Federal Trade Commission (FTC) advises that you consult your state attorney general and local consumer protection agency. The FTC’s website has other tips that can help you choose the best credit counselor for you.
Beverly Harzog is a nationally recognized credit card expert, consumer advocate, and the author of Confessions of a Credit Junkie: Everything You Need to Know to Avoid the Mistakes I Made. She runs a popular credit card blog on her website, www.BeverlyHarzog.com.
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