Once people accrue credit card debt, they may find themselves trapped in a difficult cycle. Interest and fees keep adding up, and the cardholder probably needs to continue covering some expenses with their revolving credit.
People who have nearly maxed out their credit cards may happily accept a balance transfer offer from a new credit card company or an existing credit card that offers an increase to their total line of credit. Balance transfers allow people to move what they owe from one credit card to another.
Often, there is a promotional interest rate that could decrease what an individual pays in interest every month – for a limited amount of time. While balance transfers may look helpful, they often keep people trapped in staggering levels of debt.
Why balance transfers don’t help
Moving a large credit card balance from one company to another does not diminish what an individual owes. If anything, the borrower may have to pay back more because a fee likely applies. That fee might be a percentage of the total amount transferred.
While there may be a low initial interest rate on balance transfers, possibly even a 0% rate, that rate only helps those who can pay everything they owe each month. When the promotional interest rate expires, the credit card company may assess interest for multiple months all at once at a much higher rate.
Balance transfers only provide a brief respite from mounting credit card debt. Bankruptcy can offer a more effective long-term solution. Those who successfully file for personal bankruptcy can discharge eligible debts, including credit card balances.
Recognizing that credit card debt has become unsustainable could help people assert themselves. A bankruptcy filing is often a better solution than the for-profit debt solutions offered by credit card companies. It’s important to learn more. Having legal guidance can help.
