Using Credit Cards To Pay Off Debt: Is It A Good Idea?


If you’re in debt and you've been searching the internet for advice on how to clear it, you might have come across balance transfer credit cards. It’s a fairly common solution because it’s a pretty easy way of clearing debt. But the truth is, it’s only an easy way of clearing debt for some people. For others, it’s a road into an even worse financial situation and if you’re not using balance transfer credit cards correctly, it can just lead to a vicious cycle of debt that you’ll struggle to get out of.


If you’re wondering whether it’s the right thing for you, read this quick guide on balance transfers for paying down debt.



What Is A Balance Transfer Credit Card?

A balance transfer credit card is a card that will allow you to pay debts off other cards, or pay down overdrafts etc. A lot of credit cards won’t allow this and you can only make purchases with them, not pay balances. The reason that people use them to help them pay down debt is that you can reduce, or even eliminate your interest rates for a period and make the debt more manageable. So, if you take out a new balance transfer card that has lower interest rates than the credit card you’re currently paying off, you pay off the old one and move the debt over the new card. You still owe the same amount of money but you don’t have to pay the same rate of interest. Some cards have an introductory period of no interest, usually 12 or 18 months; these are the most popular balance transfer cards, the idea being that you move your debt onto a new card so you aren’t paying interest, and then clear the debt before the introductory period is up and the interest payments kick in again. In theory, it’s a good idea, but it’s not always possible.

Which Card Should You Get?

The discover it credit card is the best balance card credit card out there at the minute. You’ll get 18 months interest free on balance transfers which is plenty of time to clear those debts. You’ll also get 6 months interest free on purchases which is good if you have any emergencies like a broken down car etc. that you need to pay for.

Should You Get One?

This method of paying down debt only works if you can actually clear that debt before the introductory period is over, otherwise, you’ll end up getting another new card and just moving the debt around and never actually clearing it. If the interest payments are higher than your current ones when they eventually kick in, and you haven’t cleared the debt, you could end up spending more. That’s why you should only get a balance transfer card if you’re sure you can actually afford to pay down the debt. It’s also worth remembering that if you’ve got a particularly bad credit score, you won’t be able to get one anyway.

If you’re sure that you can pay it off before the 18 months is up, you should get a balance transfer card, otherwise, just carry on trying to make those monthly payments as you are now.

 

1 comment

  1. We recently transferred a balance from one card to another to avoid interest payments.

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