There are many services posited as solutions for credit card debt. However, many of those alleged solutions just make the situation worse. Balance transfers can be helpful for certain people in specific scenarios.
In cases where people have simply overused a particular line of credit and need an opportunity to reduce the interest rate that applies while they pay off what they owe, a balance transfer is the perfect tool. However, most people dealing with high levels of credit card debt are not in a position to pay off what they owe quickly. A balance transformation can worsen their situation instead of improving their debt levels.
How balance transfers hurt people
Moving credit card debt from one lender to another does not diminish the amount owed or reduce the financial pressure on the borrower. Most of the time, balance transfers involve a fee. The borrower pays a certain percentage of the amount they transfer as a fee.
While there may be a lower interest rate initially, the lender usually imposes a higher rate once the promotional period ends. In some cases, the credit card holder may become responsible for months of interest at a relatively high rate all at once. Their balance may go from roughly the same to substantially higher overnight.
Balance transfers do not resolve the debt that people have and may actually increase how much they owe. Bankruptcy, on the other hand, can eliminate credit card balances and other unsecured debts. People struggling to cover all of their financial obligations may find that personal bankruptcy is the best solution available for their high credit card balances. Eliminating debt instead of simply changing creditors can make a much bigger impact on an individual’s overwhelming credit card debt.