Q: I have almost $20,000 in credit card debt. I am paying really high APR fees. Are there programs that can help me consolidate and lower the fees without damaging my credit score?
A: One option is a balance transfer card. Here’s how they work – you open a new card with a 0% APR on balance transfers (usually 12–21 months) and transfer your existing balances onto it, reducing your payments to one.
A few things to keep in mind – you’ll need good to excellent credit to qualify and most charge a fee of 3–5% of the transferred balance. Make sure you’ll save significantly more than that during the promo period.
Also, the 0% promo rate usually applies only to the transferred balance, not new purchases. Some cards tack on retroactive interest if you don’t pay off your transfer before the promo ends. Lastly, when the intro period is up, the regular APR can be steep.
Another option is a debt relief program. Also known as debt settlement or debt adjusting companies, they work to renegotiate, settle, or change the terms of your unsecured debt with creditors.
We recommend considering them only after other options — like not-for-profit credit counseling — don’t fit. But if you’ve already fallen behind, debt relief programs might be worth a closer look. Here’s everything you need to know.
