Woman making an online purchase with a credit card

One of the balmy days of February prompted my friend and I to take a walk. As we were walking, the discussion turned to finances and, in particular, credit card debt.  She revealed she uses her high-rate store credit cards for online purchases because of the perks and free shipping. Her issue is that she isn’t always able to pay off her card every month, which subjects her to the higher rate each billing cycle.

This conversation made me question how many other people are trapped in the same cycle. Retailers lure you in with coupons, store cash, card discounts and free shipping to make it very appealing to use their store credit card. If you can’t pay off the balance every month, you are now paying more for an item than if you purchased the item with a lower-interest credit card without the discount.  You can break this cycle by moving your debt to a lower-interest credit card to allow you to pay more on principle and pay the debt off sooner.  If you’ve accumulated a large amount of credit card debt, you should consider other options like applying for a personal loan or moving your debt to a home equity line of credit (HELOC) if you own a home.

Here are a few items to take into consideration when moving your high-rate credit card debt:

  • What percentage of the debt do you pay as a transfer fee?
  • Is the rate you are quoted a promotional rate?
  • If it is a promotional rate, can you pay off the debt within that promotional-rate time?
  • If it is a promotional rate, what will the APR of the card be after the promotion ends?
  • Is a personal loan a better option for you?
  • If you are a homeowner, is a HELOC a better option for you?
  • How do you break the cycle and make inroads into paying off your credit card debt?

I have followed up with my friend and she has tried to negotiate with her high-rate credit card provider without a satisfactory resolution. I suggested she apply for First Commonwealth’s low-interest rate credit card. We don’t charge a transfer fee on balances transferred to our credit cards.  Currently, there is a 12-month promo rate until April 30, 2017 and then the rate reverts back to our low rate.  She also has the options to apply for a personal loan or a HELOC. If you are looking for help reviewing your credit card debt like my friend, or your budget in general, First Commonwealth offers free financial wellness counseling to all our members through our trusted partner, GreenPath. Let us help you review your options and then you can make the best decision to improve your financial situation.

First Comm Mom