Are you caught in a cycle of credit card balance transfers?

Some experts recommend that individuals with a current credit card balance look into other account options as a way to save on the overall cost of the debt. Specifically, some people recommend that you transfer an existing balance with a high interest rate to a new card that offers a low interest rate or no interest rate on balance transfers. While this isn't, in itself, a bad tactic, it can lead to unintended consequences.

Some people who make such a transfer don't pay off the account balance within the introductory period. After a certain amount of time, usually six months to a year, interest is applied to the transferred balance. Sometimes, that interest is applied proactively, which means you can end up paying as much or more for the transferred debt.

In other situations, individuals transfer a balance from one credit card to another, but they keep the line of credit on the first card open. That leaves them free to use the old credit card, running up a second account balance. Such activity can increase the total amount of debt you owe and make it much harder to make payments on the debt each month.

While zero-balance credit card transfer offers can be a viable financial tool for reducing the cost of your debt or paying down controlled debt faster, if your debt is already out of control, then this might not be the right option for you. More viable forms of debt relief are available, including bankruptcy. Depending on your situation, action that is more comprehensive than a simple balance transfer might be required.

Source: Forbes, "The Risks And Opportunities Of Using A Balance Transfer To Eliminate Credit Card Debt," Nick Clements, accessed Dec. 10, 2015

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