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If you have a large, outstanding balance on a credit card that carries a high interest rate, transferring that balance to a card with a lower interest rate might make financial sense for you.

“Transferring a balance from one card to another with a lower interest rate or fee structure can save you money,” Rod Griffin, director of public education for credit bureau Experian, said in an email. “Lower monthly payments can also help you manage the existing debt and pay off the debt more quickly.”

Making the Most of a Balance Transfer Card

One of the most common reasons people get a balance transfer card, according to Griffin, is to “reduce interest rates or fees” to help get their debts paid off sooner. But this only works if you take action to pay off the card before the lower interest rate expires.

If you’re considering a balance transfer card, it’s important to read the terms and conditions carefully. Is there a transfer fee that could potentially negate any savings you might see? Nearly all credit cards with 0% APR promotional financing offers impose a 3% fee on the amount transferred. Does the 0% interest rate expire in six months? One year? Whatever the time frame, it’s a good idea to take a close look at your finances and figure out how much you can put toward paying off your credit card debt during this time.

While you’re focused on paying down your balance, Griffin also advised practicing self-control by putting your old card away so you aren’t tempted to use it to make more charges.

“People get into trouble when they realize they have a card with no balance and begin using it to make additional charges,” Griffin said. “If you lack discipline to not use the old card, you can end up with more debt, not less.”

Same goes for the new card. You’ll want to be smart about your spending and payments so you don’t rack up more debt.

“Missing payments or making purchases could cause interest rates or fees to jump up dramatically and end up costing you more,” Griffin said.

Choosing a Card

The low-interest rates that a balance transfer credit card can offer may be very tempting, but it’s important to do your research. You can start by comparing the best balance transfer cards in America.

“Look for cards with lower-interest rates,” Griffin advised. “Understand the consequences of using the card as well. Do you have to pay a higher interest rate on new charges? Does the interest rate on the transfer expire after a period of time? If it is a ‘teaser’ rate, you need to pay off the balance before it expires or you could end up paying more, not less, in the long run.”

Before you choose any cards, it can help to know where your credit stands, as this will affect what terms and conditions you qualify for. You can see two of your credit scores for free, updated each month, on Credit.com.

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Image: Todor Tsvetkov

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