Financial institutions and credit card companies often market their cards by offering very low interest rates and minimal payments for a fixed amount of time on balances that you transfer from other credit cards.
A balance transfer can seem like a great short-term solution to overwhelming credit card debt or out-of-control payment requirements. However, a balance transfer is like putting a bandage on a deep wound. It won’t fix the problem but will simply hide it for a short amount of time.
The problem with credit card balance transfers
When you owe $6,000 to one credit card and you transfer that balance to another card, you still have to pay all of that money back. However, because your card with a high balance now has more available credit, you might actually spend more money and end up carrying more debt.
Additionally, the card that you transfer the balance to may hit you with fees and interest. They may charge a flat-rate fee that is a percentage of the total amount transferred. They may also only offer no interest or low interest for a few months to a year. If you don’t pay the full balance off in that time, they might assess a higher interest rate going back to the date of the transfer.
Moving debt from credit card to credit card won’t solve your financial woes. A bankruptcy discharge, on the other hand, could effectively end the pressures caused by ever-increasing consumer debt. Realizing that bankruptcy is a more permanent solution to your credit card debts can help you better determine how to handle your financial woes.