Credit card debt can grow to an unsustainable level in a matter of weeks. Unexpected expenses, job loss and unnecessary spending can all contribute to an increasing credit card balance.
People who have maxed out their cards or who can only afford to pay the minimum monthly payment due on their accounts may seek relief from their credit card debts. Receiving a balance transfer offer from a current lender or another credit card company may feel like a solution. Sadly, balance transfers have a way of worsening people’s credit card debt.
Why don’t balance transfers help?
There are two key issues with balance transfers that make them less-than-ideal solutions. The first is the cost involved. Typically, lenders charge a fee to transfer a balance. It may be a set fee or a percentage of the balance.
Additionally, there is interest to consider. Balance transfer offers often come with deceptive introductory interest rates. However, if the party transferring the balance doesn’t pay it in full in a set amount of time, they may accrue a large amount of interest going back to the transfer date all at once.
The other major issue with the balance transfer is that it does not actually address the debt or reduce the amount owed. It simply changes the lender and offers a temporary respite from interest accruing on the balance.
A personal bankruptcy filing is a much more permanent and effective solution for credit card debt than a balance transfer. Successfully discharging debts through bankruptcy can eliminate the obligation to pay credit card balances.
People struggling to make their minimum payments and contemplating balance transfers may want to consider other solutions for their credit card debts. Bankruptcy can protect people from collection efforts and eliminate repayment obligations if a filing leads to a discharge.
