Pros and cons of balance transfers and debt consolidation | 7 On Your Side

NEW YORK (WABC) -- For many people, the top of their New Year's resolution list is "save more money."

A lot of us want to get physically fit and financially fit.

You can start by tackling that crippling credit card debt.

But, sky-high interest rates can make it impossible to chip away at those balances.

How did we get to 1 trillion in debt?

A combination of the pandemic, less income. and then this YOLO (you only live once) and FOMO (fear of missing out) attitude where we realized life is short.

Then came inflation, higher interest rates, and younger people taking on debt, and here were are.

So let's look at the first solution. See if you can transfer some of that debt with a higher interest onto a 0% interest rate card.

Here are the balance transfer musts:

- You need great credit to qualify

- You cannot use other credit cards

It moves your debts to a different card that has lower interest and then you save money and consolidate your bill into one easy payment.

The cons are that a 0% interest rate does not last forever.

There are often transfer fees involved and that could add to your debt if you don't stop using the other credit card.

You can also take a personal loan, but there's an interest rate there that you have to make sure you are paying off more than the minimum to chip away at your debt faster.

Debt consolidation companies have fast approval and they often are paid off faster than paying the credit card minimums. They have fixed interest rates with predictable payments.

The cons to debt consolidation are that you may not qualify, there are higher monthly payments, and the maximum loan amount may not cover your debt.

The bottom line is you need to do research before signing up for any cards or programs and be disciplined with your payments.

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