Transferring to a Gold MasterCard

Posted by: Henry B. | Jan 07,2008

I could imagine people perusing the information on this site about debt release and thinking it doesn’t offer enough of a quick-fix solution.  Here you can find information about how to budget effectively, but you might think, Great, I’ve set up a budget but my debt is still the same.  Sure I have more money to set aside for that debt, but it’s still going to take me years to pay off that debt, even if I pay an extra $100 a month towards my credit card bill.

I hear you.  Suppose you’re $15,000 in debt – not astronomical in today’s climate.  If you pay off an extra $100 every month that goes to the balance instead of interest and fees, you’re only going be paying off an extra $1200 in a year.  It’s barely going to make a dent in your credit card balance.  So what can you do?  First, you’re going to need to be realistic.  There’s no overnight fix that’s just going to lower your balance by half.  In such a scenario, your credit rating is going to tank much like filing for bankruptcy.  It’s just not worth it and in most cases not possible.  

What you could do, however, is transfer the balance to a new card that will potentially lower your payments per month.  What will happen is that less of your monthly payments will go to interest and more of the payments will go to the balance.  As a result, you’ll pay $100 over the minimum, plus what you were paying normally.  It could amount to three times or more a slice in the balance as paying with your current card.  No, I can’t promise that you’ll be debt-free by the end of the year.  But the different between being, say, $9000 in debt on a $20,000 limit card and $13,000 in debt is a lot.  It could result in a much larger differential.  

It can be much more difficult to manage this if you have a low credit rating – which is almost a given if you’re balance is such a high percentage of the limit.  In this case, I’d recommend transferring your balance to a Gold MasterCard.  There are several bank-affiliated Gold cards available, but they all have one thing in common: the availability to low-rating borrowers with a relatively low rate.  Usually these two things don’t go hand in hand.  There are activation fees, unlike other cards, but these are nominal compared to what you save every month.  

If you are in good standing with your credit card company for an extended period, you may be able to negotiate for lower rates and lower payments month to month.  Any credit card company wants to keep you in house, as opposed to jumping ship to another company, so a simple phone call can result in getting a new credit card plan with better terms.  

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