There may come a point when you find that you have debt spread over several loans. While this is common, there's no doubt that you may begin to feel bogged down at some point.
Take, for example, someone with three separate credit cards with three separate balances. Although you can pay down each one over time, doing so means a lot of money out of your pocket for finance charges. Not to mention the difficulties of staying organized.
A balance-transfer credit card may be able to solve some of your financial problems, as it allows you to bring many types of debt under the same roof.
Here are three things to consider:
- The fee: A balance-transfer credit card doesn't come cheap, as you're charged a fee, typically 3 to 5 percent, of the debt you're transferring.
- The promotional APR: Most balance-transfer credit cards have a promotional APR that generally lasts 12 to 24 months. With a zero percent promotional period, you have the opportunity to pay down your debt without finance charges getting in the way.
- Your savings: Calculate how much money you'll save, as this gives you a clear idea of whether or not paying the fee is a good financial decision.
There's nothing wrong with giving a balance-transfer credit card a strong look, but don't assume this is the solution to all your financial problems. You're not eliminating your debt, but instead moving it around.
If you're unable to make anything else work, a bankruptcy filing could be the best way to eliminate your debt once and for all. It may be a last resort, but it's something to strongly consider.