People who find themselves in debt sometimes run out of ways to pay off what they owe, and it can get really frustrating and hard to carry on. It could be because of the payment plans, interest rates, or a change in their monthly income. And when it comes to your credit card debt, refinancing it can help make things much easier for you. Take a look below at 6 reasons why you should go for it.
What Is Credit Card Refinancing?
We all know that refinancing your debts means you start the process of changing your lending company, and the reasons behind it may vary, but it’s mostly because of the high-interest rates. This is just like its traditional meaning; changing your dealings with one lender to a new and different one. It follows the same system with credit cards; you basically start the process of moving your credit card balance from the first card to another one that has a much easier pricing structure that suits your needs.
Sometimes credit card companies have huge interest rates that people can’t keep up with, which causes a lot of problems and getting people stuck in debt longer. So if you have a card with a 20,000 dollar balance and an 18% interest rate, for example, you can change that balance to another card but with a 10% interest rate instead. So you’d save some money over the years if you refinance it. Because with that 8% that you will save per year, it calculates to about 1600 dollars saved by moving that 20,000 dollar balance card to a different one with better interest.
Mixing The Process With A loan
Believe it or not, when you apply for this type of refinancing, you can switch it to a loan, and this method works everywhere around the world. If you’re living in Denmark, a country that has the ninth-highest GDP per capita among OECD member states, applying for a lån (the Norwegian term for loan) can be an excellent choice for you because it’s flexible and has different benefits that meet your needs. The process is called credit card consolidation, which refers to the steps of paying off one or more of your credit cards with a lower-interest loan similar to a personal loan.
The great thing about it is that your interest rate will more or less be fixed, meaning it will never go higher than the initial agreed-upon percentage. It’s really perfect if you’re one of those people that use 3 or 4 credit cards, so you can pool all your balances into one fixed payment to be given back each month. You don’t have to do it on all your cards; you can mix it by having two being paid off by a loan, and the rest gets dealt with another way if one big loan is too much.
Here are other reasons why refinancing your credit card can be a good option:
1- The Lure of Attractive Offers
In some countries, credit cards could have an offer where you get a card with a zero percent introductory rate. This is a perfect incentive for people to change and switch their balance to the new card because the benefit of saving money is too great to miss out on. This feature is only temporary though; usually, the interest-free credit cards last for about a year or 18 months.
It’s still a great advantage of refinancing your credit card; your interest expense over that time will be so much lower, and you won’t feel the pressure of the debt as hard as one with a significant interest rate. You can save close to what’s equivalent to 2000 dollars because of this introductory percentage offer, so that year can prove to be beneficial in helping you save a little money in actually paying off your debts.
2- The Process Takes a Short Time to Carry Out
The application process of other alternatives can take a few days to process, and it would require additional paperwork to verify your income. On the other hand, credit card refinancing can take about a minute or two in most cases to get the decision done. They have online forms, and it can be accessed with ease, so if you’re in a real hurry, refinancing is a good choice.
Sometimes it reaches a point where the saying “Time is money” is literally happening in your life right now. You’re trying as hard as you can fix things so you can be a little safer when it comes to your debts. Any time-consuming constraints can set you back a lot, so you need something reliable, quick, and efficiently save you from a dire situation.
3- Say Goodbye To Bad Interest Rates
The main goal here is to eliminate steep interest rates that plague your mind, so many people are neck-deep in interest that it’s too much to bear. In a perfect world, you’d need to be smart with your payments and never miss one because you can’t afford to fall behind on your monthly payments. You would get penalties over time, and that’s how people get stuck in the interest rate fiasco.
Instead of eventually paying even more money because of interest, why don’t you start the process of switching your credit card balance to a different card instead? It’s one of the best ways to deal with high-interest rates; it makes your life a lot easier, and you won’t have problems paying the monthly
4- Getting a Better Credit Score
Having a good credit score is the best thing for you, because whenever you want to apply for anything; you are more than likely going to get accepted if your credit score is decent. If your goal is to pay off your debt at a faster pace and save money from lower interest rates in the process, then you should definitely refinance your card.
Having the problems of high-interest rates means you will have trouble paying off the monthly payments all the time. That leads to late payments, penalties, and your credit score will take a big hit from this. But if you carry out this switch, the process will keep your credit score intact.
5- It’s Easier To Use The Credit Line Again
Don’t you just hate it when you max out your credit cards? You are just stuck there and can’t do anything, and if you’re already having issues paying off your debt, then you will not be gaining access to the credit like anytime soon. But with refinancing, it all changes for the betterment of your spending habits. A lot of people love shopping and getting what they want without carrying cash in their pockets every day.
When you are quick with paying off the money you owe, your credit line can be available again for you as it’s paid down. A credit card has a revolving nature of its arrangement, so whatever you pay can be used again as a new source of credit. So instead of being stuck, you can have a better chance of getting your credit back.
6- You Can Utilize Your Points
Every time you use your credit card, you get points that accumulate over time. These points can be very useful and helpful in some cases, and they have discount coupons for a lot of different brands, restaurants, stores, services, travel agencies, plane ticket prices and many more. But if you maxed out your card, then you won’t be getting any extra points.
Refinancing can help you with this because it will help you pay off your credit card debt with ease because of the low-interest rate, so when that happens, you will open up more of your credit line to be utilized. You will also be able to increase those points again and get all the nice benefits from it. The larger the number, the bigger the discount and benefits from your points.
Things To Consider
You need to keep in mind that some credit card companies can charge a balance transfer fee, so you need to consider that when you’re making that switch. Ask about it and talk with the company about the exact number, most of the time it’s not really advertised and clear. So be sure the company is completely honest with you.
Another important thing for you to consider is that credit cards tend to calculate their rates according to the market rates and that changes randomly. This makes the rate variable after a long period of time, so you have to calculate the exact numbers and see if refinancing can help you or would be somewhat the same after the first year.
Getting yourself in debt can be a messy process, but there are ways to save you from that predicament. It doesn’t have to be too complicated or impossible anymore; there are ways and better alternatives for you to get out of this and be debt-free. You just have to be smart about it, calculate the pros and cons of everything and see which credit card refinancing plan works best for you.
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