Are you stuck in credit card debt? Balance transfer cards could be your way out in 2024
Those looking to reduce credit card debt in 2024 will need their own action plan, filled with budgets and smaller repayment goals.
A 0% balance transfer credit card may also be helpful because the interest rates are high.
Pay close attention to the fine print and initial 0% rates.
Ted Rossman, senior industry analyst at Bankrate, said balance transfer cards are “my favorite debt repayment strategy.”
Even as card issuers tighten their standards and card delinquency rates rise, Rossman said he was “pleasantly surprised” by the wide availability of balance transfer card services.
Many cards offer balance transfer benefits along with other incentives, such as points or rewards, Rossman said. But cards like Citibank C
Simple Card, Wells Fargo WFC,
Reflect Card and US Bank USB,
The Visa Platinum card is a more direct example, he said.
Here are the deals for these types of credit cards:
They top up the balance on another card and charge a lump sum transfer fee, usually 3% – 5% of the balance. Then there is an initial 0% annual rate that typically lasts for almost two years. Citi, Wells Fargo, and US Bank cards all offer 21 months interest-free.
After that, the APR can rise significantly and easily exceed the rates of many other cards.
For example, the Citi Simplicity card says the APR is between 19.24% and 29.99%, while the US Bank card says the interest rate is between 18.74% and 29.74%. At Wells Fargo, the percentages after 0% are 18.24%, 24.74%, or 29.99%.
In all cases, an individual’s rate will depend on their credit score.
For comparison, the annual percentage rate (APR) for all credit cards with a balance averaged 22.7% in the third quarter, according to Federal Reserve data.
Rossman said the 0% offer is a “marketing gimmick” for banks to attract customers. “They are confident that many people will not pay the full price.”
Nonetheless, cards can provide a great opportunity to reduce debt. The high wait rate “isn’t really a problem,” Rossman said. “It’s just part of the deal. “There are ways to use this to your advantage.”
For example, the average third-quarter rolling balance for cardholders who didn’t pay in full each month was $6,088, according to TransUnion TRU.
Over 21 months without interest, someone would have to pay almost $290 per month to pay off a balance of $6,088.
According to the Federal Reserve, it now carries a 22.7% APR, which is the average interest rate on third-quarter revolving balances. Here, an individual would have to pay nearly $354 per month for 21 months to wipe out the balance. That’s almost $1,350 plus interest.
People with a credit score of at least 670 and an outstanding balance of up to $5,000 may be good candidates for this card, Rossman said. “I think you should feel comfortable managing your money yourself. “This is really a DIY solution,” he said.
Of course, there are other ways to combat credit card debt. One option is to seek help from a non-profit credit counselor. Another move is to take out a personal loan with an interest rate that is lower than your credit card annual percentage rate (APR).
“We encourage customers to find the financing option that best suits their budget and situation, but for those looking for a low-interest credit card, we offer that option through the U.S. Bank Platinum Visa,” a U.S. representative said. Bank spokesperson.
Related: Want to pay off your credit card debt in 2024? Here is your plan of action:
