Consolidation and debt relief for Quincy residents (Part 3)

Finally, having looked previously at debt consolidation in general and debt consolidation loans in particular, we'll turn this week to an examination of credit card balance transfers. Quincy residents are likely familiar with this type of consolidation from advertisements in the mail. While a credit card balance transfer has some benefits, it is important to distinguish between it and true debt relief.

The way a credit card balance transfer offer works is simple. Say you have one or even several credit cards with balances at high interest rates that you are struggling to pay off. Another credit card company reaches out to you and offers you a promotional low or even zero percent interest rate if you use the funds to transfer your existing balances over to that card. So instead of having several balances at high interest rates, now you have just one at a much better interest rate - which should make it easier to pay it off.

Credit card balance transfer offers come with a few catches, however. One is that there will almost always be a fee charged to make the transfer, usually a percentage of the amount transferred. Then the promotional interest rate will expire after a certain period of time, perhaps six months or a year, and any balance remaining will begin to accrue interest at whatever the card's regular rate is. Some may even go back and retroactively apply interest for however long the promotional period was if you still have a balance when the promotional rate expires.

Credit card balance transfers can help in some situations if borrowers observe the terms carefully and use them wisely. But unlike bankruptcy, the full debt must be repaid, and a balance transfer can backfire on consumers who aren't aware of the fine print. Bankruptcy, on the other hand, provides a truly fresh financial start in that unsecured debt - in whatever amount - can be completely eliminated, with no transfer fees or promotional periods. We provide this information as a general background on bankruptcy and debt consolidation, not as specific legal advice. However, those who would like to learn more about bankruptcy and how it may benefit them should consider discussing the matter with an attorney of their choosing.

Source: CFPB.gov, "What do I need to know if I'm thinking about consolidating my credit card debt?," accessed on May 4, 2018

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