NORFOLK, Va. — We are hitting that time in the month when credit card payments are due and it’s likely that a lot of statements have charges from the holidays.
As people prepare to pay, News 3 has learned that they are getting targeted ads on social media regarding balance transfers. While it can be very helpful to some people who are trying to clear debt, balance transfers are not the right choice for everyone.
Andrea Nunez is one of the millions of Americans trying to find the right solution to her financial problems.
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“[We have about] $100,000 in credit card debt,” she says.
Nunez and her husband have spent years relying on credit cards after medical bills wiped out their family's savings account.
According to the Peterson-KFF Health System Tracker, about 14 million people in the United States owe over $1,000 in medical debt and about 3 million owe medical debt of more than $10,000.
Thomas Nitzsche, Vice President of Public Relations for Money Management International says, “about one in five of the clients that we serve come to us because of a medical-related issue.”
While medical debt can be crippling, others find themselves in financial trouble just dealing with day-to-day life or rollover charges from the holidays.
Nitzsche says when people are caught in a cycle it is easy to lean on what is marketed as an "easy solution."
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“In Virginia, we've seen a significant increase, about a 26 percent increase in the number of people reaching out for financial counseling. Their average debt levels are up about 13 percent year-over-year,” he says.
Nitzsche says MMI did a study a few years ago and learned that balance transfers were the most common form of debt relief.
“Balance transfers are a very common debt relief tool when consumers feel overwhelmed with credit card interest rates or payments,” he says.
Balance transfers offer perks like no annual fees and a zero percent rate.
“It’s usually a promotional rate, often a 0% for a certain amount of time – that might be six months [or it] might be up to 21 months, but it gives you more time to pay off the debt, where all of your payments going to principal rather than interest,” Nitzsche says.
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He says if you can pay it off during that period, it may be a good option, but not everyone is realistic about making the monthly payment.
“We do see a lot of people that sort of end up in a cycle of debt where they get one balance transfer card, they're not able to pay it off then at the end of the period, they apply for another one, so on and so forth, potentially also occurring more debt along the way,” he says.
It’s important to understand the process up front, know your options and understand that balance transfers can't be used to avoid the deeper problem of your finances.
“Little alterations to your financial situation are going to pay off in the big picture,” says Kevin Hussey, President of Heritage Wealth Management Group in Norfolk.
Hussey says his advisors help people set goals, create savings plans, and look ahead for retirement. They are focused on their clients getting to the heart of saving.
“If you do identify that, hey, there's more dollars going out than coming in, then let's figure out ways that we can try and tip the scale right to have it where you can actually start putting dollars away,” he says. “Regardless of your situation, it's always good to just kind of step back and look at things. Whether it's your health, your finances don't be intimidated from reaching out to someone to get help.”
One more thing to mention about balance transfers; to get the 0 percent, you need to have Very Good or Excellent credit. It's important just to recognize your spending or saving pattern and be honest with yourself.
