Best Way Out Of Credit Card Debt

Best Way Out Of Credit Card Debt – Generally, you cannot pay off the entire balance on one credit card with another credit card, except by transferring the debt from one card to another in a process known as a balance transfer. While this method may work in some financial situations, it doesn’t make sense for everyone. Because transferring debt from one credit card to another may be a bad idea for your particular financial situation, you may want to weigh your options and consider other ways to pay off your credit card balances directly.

This post discusses whether you can pay off one credit card with another and presents other options for paying off your credit card debt.

Best Way Out Of Credit Card Debt

In some cases, you may have the option to pay with another credit card using a balance transfer. Balance transfers allow cardholders to transfer outstanding balances from one credit card to another, often for a fee.

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Credit card issuers often offer introductory periods for new credit cards that include interest-free or low APR (annual percentage rate) balance transfers, giving you a way to consolidate your debt into a single account with your company.

While this provides a roundabout way to pay off one credit card with another, evaluate the terms carefully before choosing this route. Introductory periods are limited and you may end up paying higher interest rates after the period ends.

Credit card companies generally require that you meet certain criteria for a balance transfer, including a good credit score. If you have bad credit, it may be difficult for you to qualify.

Additionally, your approved credit limit may not cover the amount you owe. Because lenders have different requirements and terms, consider shopping around and checking the requirements and terms of different credit card issuers before applying for a balance transfer card.

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To determine whether a balance transfer will save you money in the long run, you need to do the math.

Let’s say your current credit card has a 20% APR, you have a balance of $2,500, and you pay $250 per month. Your loan will take 12 months to pay off and you will pay a total of $2,758, including $258 in interest and fees.

Let’s say the new balance transfer card has a 5% APR (assuming the 0% introductory APR expires after 12 months), including a 5% balance transfer fee, and you pay $250 per month. Your balance transfer loan will take 11 months to pay off and you will pay a total of $2,625.

In this case, you may find that transferring the balance to a new card is worth your time and effort. Additionally, this calculation assumes that the new card has no annual fee and that the introductory APR lasts for 12 months. The introductory period for balance transfers may only last 6 months, so be sure to factor that into your calculations.

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Because cards and issuers have different approval requirements and credit limits, find the best balance transfer credit cards for your unique situation. The Forbes Balance Transfer Calculator can help you compare options.

While you may be tempted to pay off your debt by getting a cash advance with another card, these cash advances often come with high costs.

In addition to paying ATM and cash advance fees, you may have to pay a higher APR for your cash advance than on regular purchases. Cash advances can increase your debt, so don’t use them except as a last resort in a financial emergency.

Instead of opting for a balance transfer or cash advance, you can consider other ways to help fix your personal finances.

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When you have debt and feel like you can’t handle it on your own, the following services can help you regain control of your finances.

If you have good credit, you may consider applying for a personal loan to pay off your credit card debt. This idea makes sense if you get a personal loan with a lower interest rate than your credit card.

However, if you don’t manage your finances responsibly, you can create more debt. Additionally, personal loans may have additional fees and interest rates that depend on many factors, such as your credit score, information in your credit report such as late payments or fees, the loan amount, and the terms of your agreement. .

Before you decide to apply for a loan to pay off your credit card balance, consider the following factors:

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As an alternative to paying off debt with a balance transfer or personal loan, you can tackle your credit card bills head-on with the following strategies. You could also consider paying off debt or saving money, perhaps creating savings goals or adding side jobs along the way.

If you have multiple credit cards with outstanding balances, you can start with the debt avalanche method. This debt payoff strategy suggests paying off the card with the highest interest rate before moving on to the card with the next highest interest rate.

By focusing on high-interest credit cards, you can potentially avoid accumulating more debt (in the form of interest) while you try to reduce it.

When deciding which debt to pay off first, you can also try the snowball method. This payment strategy allows you to pay off the card with the lowest balance to eliminate the smallest and largest debt.

How To Get Out Of Credit Card Debt Fast And Pay Off Your Loans

While both approaches can help you pay off your card balances, the snowball method allows you to gain momentum and stay motivated as you cross debts off your list.

Although you should make at least the minimum monthly credit card payment, paying just that amount can keep you in debt for a long time. Your credit card statement also comes with warnings: how long it will take to pay off your balance and how much interest you’ll pay if you only make the minimum payment. You can potentially eliminate your debt faster and pay less interest if you find a way to pay more than the minimum each month.

While you can indirectly pay off another credit card with a balance transfer, it doesn’t always make sense to do so. You may want to consider other methods that will help you reduce your debt quickly.

To get help on the right financial path, you have tools and information to help you understand how to build or rebuild your credit.

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Ana González-Ribeiro, MBA, AFC® is a Certified Financial Advisor® and bilingual personal finance author and educator dedicated to helping populations in need of financial advice and knowledge. Her news articles have appeared in various media outlets and websites, including Huffington Post, Fidelity, Fox Business News, MSN, and Yahoo Finance. She also founded the personal finance and motivation website www.AcetheJourney.com and translated the book Financial Advice for Blue Collar America, by Kathryn B. Hauer, CFP, into Spanish. Ana teaches Spanish or English personal finance classes on behalf of the W!SE (Working in Support of Education) program and teaches workshops for nonprofit organizations in New York.

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Credit card debt consolidation can help you get a lower interest rate and potentially pay off your debt faster. Learn how to consolidate credit card debt here. (iStock)

In theory, credit card debt consolidation seems like a good idea. Replacing your high-interest credit card debt with a credit product with a lower interest rate can help reduce the amount of interest you pay on the loan.

There are many ways to consolidate credit card debt, all with their pros and cons. Some options are better than others. But the goal of all of them is basically the same: consolidate your high-interest debt, leaving you with a monthly payment at a more reasonable rate.

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