If someone gave you $500 to spend however you like, how would it feel? Imagine the freedom of having that extra money. Now think about the interest you’re paying on high-interest credit card debt — it’s like throwing that $500 away.
If high-interest credit card debt feels overwhelming, a balance transfer may be a smart solution for you. A balance transfer allows you to move debt from one or more credit cards to another card with a lower interest rate.
How do Balance Transfers Work?
The overall goal of a balance transfer is to save money on interest. What does this mean for you? You’re keeping more of your money instead of throwing it away.
Let’s break it down with an example:
Imagine you have $5,000 in credit card debt with a 25% APR. Over a year, you’d pay about $1,250 in interest alone. Transferring that balance to a card with a lower APR, such as 8.9%, could reduce your interest to around $445 annually. That’s a savings of over $800 in just one year!
The lower your interest rate, the more of your payment goes directly toward reducing the debt instead of covering interest. This makes it possible to pay off your balance faster.
However, before making a switch, keep an eye out for fees. Many cards charge a balance transfer fee—typically 3% to 5% of the amount transferred. Be sure to calculate whether the potential savings will outweigh the transfer fee.
At Advia, our members save an average of $3,907 in interest on transferred loans.3 Currently, we’re offering promotional rates as low as 0% APR for 12 months on balance transfers. After that, rates start as low as 8.90% APR.1 For full disclosures, details, and questions, visit our website or contact us.
Advantages of Balance Transfers
Balance transfers can offer additional advantages, including:
1. Simplified Payments:
Managing several payments across various credit cards can feel overwhelming, but balance transfers can help significantly. Consolidating your balances onto one card helps you stay organized and reduces mental stress. Research shows that simplifying payments can create a clearer plan for repayment and improve financial well-being.
2. Faster Debt Repayment:
With lower interest, your payments go further toward reducing the principal balance. Let’s take a look at another scenario:
- If you owe $3,000 on a credit card with a 25% APR, your monthly minimum payment might be $70. Let’s say you pay $100 each month instead.
- At 25% APR, approximately $62 of your $100 payment would go toward interest, leaving only $38 to reduce your balance.
- Transferring the debt to a card with an 8.9% APR reduces your interest cost to about $22 in the first month, allowing $78 of your payment to go toward the principal.
Over a year, this could save you over $480 in interest. And since your balance would decrease over time, the savings would likely be even greater.
By understanding balance transfers and how they work, you can take control of your debt and put more of your money toward building financial freedom. Looking for help seeing if a credit card balance transfer is for you? We have a convenient calculator tool on our website you can use to get an idea.
Other Options
However, if you’re still not 100%, you may be better suited for a Home Equity Line of Credit (HELOC). Learn about the differences in our blog or speak with a member from our team.
Advia is Here to Help
At Advia, we’re committed to helping you achieve financial freedom. Whether you’re looking to consolidate payments, lower your interest rate, or explore options for faster debt repayment, we’re here to support you.
Take the next step toward simplifying your finances. Use our convenient credit card balance transfer calculator on our website to see how much you could save or contact us today to learn more about our balance transfer options.