Job losses, salary reductions, and access to credit are some ways the coronavirus pandemic has impacted personal finances. The unemployment rate reached 7.9% in September, resulting in roughly 28 million Americans who remain out of work, relying on jobless benefits and their dwindling savings.
Accordingly, consumers are exploring various ways to pay bills on time. One option is to obtain a balance transfer credit card to pay off credit cards with a higher interest rate. But as unemployment numbers rose steadily, the number of balance transfer offers — a popular option to pay down debt and save money — started to decline dramatically.
However, there's still a chance to snag a balance transfer card before it's too late. If this is something you're considering, head to Credible today to view some of their best balance transfer credit card options, as well as their intro APR offers, any transfer fee, and terms.
Why open a balance transfer credit card?
High-interest rates hinder the ability to pay down debt because a large portion of the monthly payment goes toward the interest portion of the debt.
Balance transfer credit cards can be a useful tool for cardholders to utilize because they usually offer 0% interest rates, providing a temporary reprieve.
Apply for a balance transfer card or a credit card with an introductory offer with a lower interest rate to reduce monthly payment amounts. To see what balance transfer cards have to offer, check out Credible's online marketplace, where you can compare them side-by-side.
“With a balance transfer card, you can move your credit card from one account to another,” said Bruce McClary, spokesperson for the National Foundation for Credit Counseling, a Washington, D.C.-based non-profit organization. “This comes in handy when it allows you to benefit from an interest-free introductory repayment period, lower overall interest rate or lower fees.”
Consumers must have a qualifying credit score and good credit history and meet other approval guidelines to open a balance transfer credit card, he said. Be aware that the intro APR typically ends in 12 to 18 months.
Use Credible to determine if a balance transfer or 0% credit card makes more sense for your financial situation. Credible makes it simple to compare options.
How to qualify for a balance transfer credit card
Borrowers can qualify for 0% balance transfer offers by doing a few things.
- Increasing their credit score
- Paying bills on time
- Avoiding any hard inquiries
1. Increasing their credit score: Consumers can boost their credit score by paying down existing debt sooner and increasing their monthly payments.
Consumers can increase their chance of being approved for a balance transfer by having a good credit score, but preferably one that is between 800-850 on the FICO scale, McClary said.
Those with good or excellent credit scores, shouldn't wait. Apply for a balance transfer card today to get started on chipping away some of that lingering credit card debt.
2. Paying bills on time: “If you aren’t in that [good credit score] range yet, you can start by keeping up with on-time payments and paying down your balances so you have a manageable credit utilization ratio, which experts recommend at 30% or lower,” he said. “It’s even more important to resolve any past due accounts by paying them up-to-date as quickly as possible.”
3. Avoid any hard inquiries: If you’re planning to apply for a balance transfer card, try to avoid actions that would result in a hard inquiry on your credit, such as applying for other credit cards or taking out a loan for a large purchase, said Leslie Tayne, a Melville, N.Y.-based attorney specializing in debt relief. “Ensure all of your accounts are current and do your best to pay off balances as completely as you can,” she added.
What happened to balance transfer offers?
In April, the jobless rate rose to 14.7% and lenders began “weighing their risk tolerance levels and their exposure to potential defaults, given the uncertainty of the times,” said Tayne.
“As a result, many creditors have removed their balance transfer products altogether or have made requirements even stricter,” she said.
A survey from the Federal Reserve in April 2020 stated over 45% of banks tightened their standards for approving credit card applications in the first quarter of 2020.
Other ways to consolidate debt
An alternate option is for consumers is to obtain a debt consolidation personal loan. Explore your personal loan options by visiting Credible to compare rates and lenders.
Debt consolidation can include personal loans and other lending options, but consumers should have excellent credit to get the best rate.
“It’s vital to calculate whether you would be saving money if you consolidate your debt based not only on the cost of the loan or program but also on whether the new payment fits into your budget,” Tayne said. “If it doesn’t, then you’ll end up simply with more debt.”
People with above-average credit scores will likely receive a personal loan with an interest rate that is lower than their credit cards. A debt consolidation personal loan simplifies paying bills by making only one monthly payment instead of several with different due dates.
“In both situations, the caveat is to avoid racking up debt in other places if you’re supplementing credit for lack of cash flow,” she said.