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Most people undertake a credit card balance transfer for one of two reasons. Either they are unable to make the minimum payments on the card, and so choose to use another card to pay off the balance; or, they use a lower-interest credit card to pay off one with higher interest. The total debt amount remains the same, but shifting the balance can offer some benefits to some individuals. If you do transfer your credit card balance, there are several steps you should take afterward.
If you’re struggling to manage your finances or have a high amount of credit card debt that you’re unable to pay off immediately, there are several advantages to balance transfers, including:
- Reducing interest, if you’re able to swap the balance to a lower-interest card
- Transferring all of your debt to one place, rather than having several different payments to worry about
You’ve transferred your credit card debt. Now what? There are several important steps to take to regain control of your finances.
Step One: Start managing your finances. Have your finances been managing you, rather than the other way around? Have you struggled to keep up with your spending, allowing your credit card debt to get out of control? It’s time to regain control of your finances! First, sit down and write a budget. Track how much money you make each month; how much money you spend on known, manageable expenses, including housing, gas, and food; and how much money you have for discretionary spending. When you retake control of your finances, you’ll be less likely to need to juggle your debt in the future.
Shred the old card. Whether you’re dealing with a card with a high interest rate or you just want to get out of debt once and for all, shred your credit card. Get rid of it. When you no longer have access to it, you’ll be unable to use it–and that means you won’t be able to start racking up debt again.
Don’t cancel that old card just yet. Yes, if you cancel a credit card, there’s no possibility that you can use it. Canceling a card, however–especially one with a high limit–can hurt your credit score, which can make it more difficult for you to secure credit in the future if you need it.
Set up automatic payments–and pay over the minimum. If you’re only making minimum payments on your credit cards, it may take a very long time to pay off your credit card debt entirely. On the other hand, when you pay over the minimum, you’ll be able to reduce that debt faster, which means that you’ll be debt-free and in better control of your finances before you know it. Setting up automatic payments also helps streamline the process and prevents you from forgetting to make those important payments each month.
Check in with your spending on a regular basis. Many people are surprised by just how little awareness they have of their overall spending. For example, you may not realize that you spend $50 every time you stop at the grocery store on your way home or that you spend hundreds of dollars each month on eating out. Check in with your spending periodically. For a week out of every month and a full month out of every year, keep a record of everything you spend: both exactly what you’re spending and exactly what you’re spending it on. You’ll often be surprised by the results–and by where you can shave down some of your spending to help keep you in better control of your finances.
Getting out of debt can be difficult, but you can reclaim control of your finances and still live the life you want. If you need more help with financial management, contact us today for a free Financial Checkup to learn how we can help.
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