Managing multiple debts on store cards and credit cards can be tricky, as it can be hard to keep track of how much you owe and to whom.
However, consolidating your multiple debts into one may make things easier to keep track of.
For example, you may find it more straightforward to keep everything organised if you move your debts on to a balance transfer card so you just have one monthly payment to make, and you may even be charged a lower interest rate than you’re paying on your current cards. Keep in mind, though, that because you may end up repaying the balance over a longer period you may pay more interest overall, depending on the rate you’re charged.
Transfer your balance
If you transfer your debts to a balance transfer credit card you could save money by paying less interest on what you owe – but you’ll need to manage it properly to have this benefit. Some providers offer 0% interest cards, though this will only be for a set period. To avoid paying any interest, you’ll have to pay off the full balance of what you owe within the 0% deal window; otherwise the APR is likely to increase – perhaps significantly.
There is a variety of 0% credit card deals available, so take the time to find one that’s right for you. See how long the 0% period lasts, and what else they can offer you. It shouldn’t be too difficult to transfer your balance over from your existing accounts, but keep in mind that these card providers often charge a transfer fee.
When you open some credit cards, they will automatically ask you if you want to transfer your balances over from another card. If they don’t, you can usually do this manually, although there may be some time constraints so you should check the details of your individual card.
Beware of the costs
Whilst taking out a balance transfer credit card could help you pay your debts off faster, it doesn’t come completely cost or risk-free. As mentioned above, you will have to pay a balance transfer fee, usually between 1% and 3% of the balances you transfer. As a general rule, the transfer percentage fee will be higher the longer the 0% deal lasts, but this isn’t always the case.
When trying to find a balance transfer credit card that suits your needs, you should aim to pick the one with the lowest fee that will last for a timeframe in which you think you can afford to repay your debts. It’s also probably a good idea to go for one that has a 0% deal for several months longer than you think you’ll need. That way, you have a safety net in the event it takes you longer to repay the balance than you thought it would.
You’ll need to make sure you keep up at least the monthly minimum repayments on the balance transfer card, otherwise the 0% interest deal could be removed and you might get stuck with a much higher APR. You should also keep an eye on when the 0% deal rate ends and if you don’t think you’ll be able to repay your debts by then you might want to consider shifting them to a new card. Don’t rely on being able to get a new card in the future either – there may be none available at the time, or you may not be accepted for one. Also bear in mind that if you change cards too many times, it may affect your credit score, as it could appear to lenders that you’re taking on too much credit
The monthly minimum repayments on your 0% credit card may not necessarily be much lower than your current payments. However, it may be possible to save money as during the 0% window more of your payment will go towards clearing the debt, rather than the interest. This means you could pay your debts off faster, as long as you keep up the repayments. You might also find it easier to manage one debt rather than owing money to several places.
Depends on your history
Most 0% interest cards are for people with a good credit history, but there are some designed for those with a limited credit history or a poorer credit score. Bear in mind that these cards may only have a shorter 0% deal period, such as 18 months rather than 30 months, and high APRs after the deal has ended. Make sure that you’ll be able to pay off your balance in this time.
If you have a poor credit history, don’t keep applying for 0% credit card deals if you get rejected from one. These applications show up on your credit report and could make it harder for you to get credit in the future, as possible lenders may think that you’re taking on more credit than you’ll be able to repay. If you can’t get accepted for any deals, it might be best to concentrate on trying to get on top of the debts you have, perhaps by speaking to your lenders and seeing if you can negotiate lower, more affordable monthly payments.
The Ocean credit card – representative APR 39.9% - is designed for people who have struggled with credit in the past. Used responsibly, it can actually help to repair your credit history.
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