Your credit card balance is close to the upper limits for the available credit that you have. Then you get a letter in the mail offering you a new credit card or extending an offer from an existing card provider allowing you to transfer the balance that you owe.
The company might promise a low interest rate, possibly even 0% at first, for any amount you transfer. While freeing up some of your available credit or consolidating your credit card debt may seem like a smart move, credit card balance transfers often just move debt rather than minimizing it.
Balance transfers usually come with a fee
Every credit card company has different policies on balance transfers, but you will typically have to pay a fee to even initiate the transfer. Some companies charge a specific flat-rate fee, while others may charge a percentage of the balance that you transfer. This fee is in addition to any interest that you end up owing.
The low or 0% interest rate is likely an introductory rate, which means that if you do not pay the debt in full by the time the promotional period ends, you will be subject to higher interest rates, likely going back to the date when you first transferred the balance. You could end up paying far more for the same debt because you tried to transfer it to another credit card company.
Bankruptcy is a much more permanent solution for those dealing with high credit card balances. A successful bankruptcy filing will actually result in the discharge of your unsecured debt, which will mean you don’t incur any transfer fees or interest, and you will not have any obligation to pay back the balance after your discharge.
Learning more about the potential costs for different debt relief solutions can help you determine if they are the right tools or if filing for personal bankruptcy would be a better choice.