High credit card debt often takes many years to pay off, especially if you are only making the minimum required payments. The problem is compounded by high interest rates that eat up a big chunk of every payment. You can request a lower interest rate from your credit card issuers, but they are not obligated to negotiate with you. If they refuse your request, balance transfers can help reduce your debt by letting you get better terms from a different company.
Step 1
Apply for a new credit card with a lower interest rate than your current account. You may be able to get an excellent promotional rate that could be as low as 0 percent for a certain time period. Make sure the regular interest rate is still lower than your current card once the promotional period ends. Consider any transfer fees; according to creditcardguide.com, they may be a flat fee or a percentage of the total amount transferred. Some banks will waive these fees on new accounts.
Step 2
Transfer the balance from your old account to the new card. There are various ways to do this, depending on the company. You may be able to include a balance transfer request with your credit card application. Otherwise, the new card issuer may be able to process it over the phone or via an online form, or it might send you balance transfer checks that you can use to pay off the balance.
Step 3
Check the balance on your old credit card account to make sure it was paid off completely during the balance transfer process. There may still be a small amount due, depending on when the transfer was processed. Send in a check or make an online payment to zero out the balance if necessary.
Tips and Warnings
- Make the highest payment possible every month on your new credit card account. More money will go toward the balance when you have a lower interest rate, even if you are only paying the minimum. It is still good to pay more because that will reduce the debt much more rapidly. It will reduce the principle, which also means interest will be calculated on a smaller amount the following month.
- You must be careful not to trigger a higher interest rate on your new credit card, creditcardguide.com warns. Things such as making an additional purchases that push the account over the credit limit, making a late payment or bouncing a payment check may all give the bank the right to impose a higher interest rate. This will offset any benefit you were receiving from transferring the balance to the new card. It may seem logical to close your old credit card accounts after your transfer the balances. This can in fact bring down your credit score because older accounts make your credit history look longer. Consumer radio show host Clark Howard advises keeping your original card open and making a small purchase every six months so it will show activity on your credit report.
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