What to know about refinancing credit cards

blog image stack of credit cards

Tips to help refinance credit card debt:

According to a recent report, about 70 percent of credit card users don’t pay off their balance in full each month. If you’re one of them, refinancing your high-interest credit cards could be an option. By refinancing, you may be able to pay off your debt faster and save on interest payments. Here’s what you need to know.

What is Credit Card Refinancing?

Credit card refinancing is a way to lower the interest rate that you’re paying on your credit card debt. The most common ways to refinance include balance transfer cards and leveraging your home equity.

Does Refinancing Hurt Your Credit Score?

Yes, refinancing may lower your credit score in the short term.

When you apply for a new credit account or a loan, the lender pulls your credit report to look at your overall creditworthiness and length of credit history. This is considered a hard inquiry, which lowers your score. But, as you pay down debt with consistent on-time payments, you’ll see incremental improvements to your credit score over time.

Ways to Refinance

-Transfer Your Balance. A balance transfer card is one way to refinance your high-interest credit card debt. Many balance transfer cards offer an introductory 0% interest rate for a limited time (usually 12-18 months). During that time, you can pay down debt without accumulating interest.

Note: Balance transfer cards typically have a transfer fee. Be sure you understand all fees and penalties before you make a decision. If possible, plan to pay off all of your debt within the introductory period so you don’t end up with interest payments again.

-Use Your Home Equity. If you’re a homeowner, you may be able to get a loan or line of credit using the equity in your home. These loans typically have lower interest rates, so they can be an effective way to pay off high-interest credit card debt.

Note: Home equity loans and lines of credit do carry risks because your home is used as collateral and could be subject to foreclosure if you fail to make your payments over time.

Bottom Line

Before choosing either option, do the following:

-Research balance transfer and home equity loans
-Consult a financial advisor
-Weigh your options

Once you’ve done your due diligence, decide if it makes sense for your financial situation.

How Public Service Credit Union can help

Balance Transfer with NO Balance Transfer Fees- Learn More
Home Equity Loans- Learn More
Contact a loan officer for more information- Call or text 260-432-3433 or email pscu@mypscu.com

-Article by Chris O’Shea from Savvy Money