Woman calculates credit card debt

When you have high-interest credit card debt, making monthly payments can feel a lot like chipping away at a mountain with a hammer and chisel. If you’re paying the minimum each month, most of your money likely goes to the interest, meaning it can take years to make notable progress on the principal—the money you borrowed in the first place.

If you’re carrying a balance of $5,000 on a credit card with a high 22.99% Annual Percentage Rate (APR) and paying $150 per month, over $95 is going straight to interest, with only $54.21 reaching the principal. It will take you around 54 months to pay the credit card off—that’s four and a half years—and you’ll rack up over $3,000 in interest during that time. In total, you’ll actually pay $8,045, even though you only initially borrowed $5,000.

Transferring this balance to a card with a lower rate means more of your money will go to the principal, so you can pay off your debt faster. If you move that balance to a credit card with a lower APR of 12.99%, you will essentially flip your payment, so almost $96 goes to the principal and $54.13 to interest. That can cut a year off your estimated payoff time, even if you’re still contributing the same amount each month. Plus, you’ll only pay around $1,200 in interest, saving you an additional $1,800.

Man considers credit card options

When considering a balance transfer, there are several things to look for in a new credit card:

Promotional rates on balance transfers.
Many cards have a special rate for an introductory period, which gives you additional time to make significant progress on your debt or even pay it off completely.

In the same scenario, a 6-month introductory rate of 1.90% means only $7.92 of each payment during that period goes to the interest. That frees up the rest of your payment to quickly reduce your principal. Even when the promotional rate ends, you’ll be positioned for success, especially if you’ve paid more than the minimum for those 6 months.

No fees.
Some creditors also charge a balance transfer fee of 3-5%, which will increase your principal—a 5% fee would add an additional $250 to a $5,000 transfer. It’s important to look for a card with no balance transfer fees and no annual fees to keep your balance as low as possible so you’re not adding to your balance.

Trusted financial partner meets with couple

A partner you can trust.
Finally, when you’re considering a balance transfer or looking for a solution to pay down your debt, seek out a trusted financial partner like OneAZ Credit Union. We’ll work with you to identify the best options for your needs, develop a plan to pay off your debt and set yourself up for financial success. For more info on our credit cards, including the new OneAZ NAU Affinity Credit Card, click here.