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Will a balance transfer save interest charges on your debts?

Like many financial questions, there are no easy answers to such a question. It could help, but if certain things don't happen or something goes wrong, it may not help at all and could actually lead to higher interest charges in the long run.

If your finances are precarious, you may be looking at all the options when it comes down to reducing your debts. You may have used your credit cards to cover the cost of a large auto repair or some other unexpected expense. Now, you are worried about that debt and the interest costs associated with the time it may take to pay off the charges.

You probably have received offers from other credit card companies, urging you to transfer balances. They may carry very low, or even a zero percent interest rate. But before you sign up, you need to calculate what the transfer will cost, how long it will take to pay it off and how much the interest charges will cost once the promotional rate expires.

There is likely a balance transfer fee of 3 to 5 percent of the balance. The promotional rate may only apply for a specified period, such as 6 to 18 months. You need to then calculate what your balance will be and how much you will pay in interest charges before you pay the total balance off.

For this to be a "good deal," the cost must be less than what you will pay with the rate on your existing card and you need to be certain to make all of your payments. If you are already in desperate financial straits and are contemplating using one credit card to pay off another and then a third to pay that one off, it may be time to look for a better solution, such as a bankruptcy filing.

A bankruptcy can eliminate the majority of your credit card, installment loans and medical debt, without the need for resorting to shell-game tactics when your bills become overwhelming.

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