Credit card debt has a way of slowly accumulating over time. People who can’t pay their balances in full every month may send only the minimum payment while what they owe slowly builds due to spending, interest and even fees assessed by the credit card company.
The amount that people pay toward their credit card debt every month can put a lot of pressure on their overall financial circumstances. Some credit card companies offer attractive-looking balance transfer offers to cardholders and new applicants. Although they may look helpful, balance transfers often keep people trapped in a cycle of growing credit card debt.
Why balance transfers aren’t a debt solution
In theory, moving a high credit card balance from an account with a higher interest rate that is near its limit to a new card might seem like a smart move. A lower interest rate can reduce how much the cardholder has to pay every month and may allow them to reduce the principal balance more quickly.
In practice, many people only pay the minimum amount due. Unless they close the account when transferring the balance from it, they may then start using their available credit on other purchases. Simply put, credit card balance transfers have a way of drastically increasing the overall debt that people carry.
As if that weren’t bad enough, those attractive promotional rates often lead to surprising costs. A 0% interest rate on a balance transfer is likely only a promotional offer. If the cardholder doesn’t pay the balance in full by a certain date, they get hit with a large amount of interest all at once. Typically, that interest goes back to the date when they first transferred the balance to the new card.
Bankruptcy is actually a debt solution
All balance transfers do is move the amount that someone has to pay from one creditor to another. They may incur flat-rate fees and interest that only serve to increase their debt.
Bankruptcy, on the other hand, is a means of actually eliminating credit card debt. Those who successfully file for bankruptcy can discharge unsecured debts including credit card balances. They no longer have to pay the debts that are eligible for discharge. Instead of trying to make frantic financial moves to free up credit, getting rid of debt can be a much better approach.
Filing for personal bankruptcy can be a viable solution for those with unsustainable credit card debt. The elimination of what they owe can help them rework their budget and make safer choices about their credit use in the future.
