There is perhaps no more convenient way to consolidate debt than by using a 0% balance transfer credit card is you can qualify for the right terms. But they can also be a double-edge sword if you fail to follow-through on your strategy to eliminate your debt. With the right credit card you can consolidate your high interest credit cards and focus on pay down one bill. But, the wrong credit card could just kick the can down the road, and worse, increase your debt costs.
A balance transfer credit card can offer a viable solution to debt consolidation. They’re easier and quicker to obtain than other forms of financing and, under the right circumstances, they can even be a cheaper solution. It really comes down to the terms of the balance transfer as to whether a credit card makes sense for debt consolidation.
Get a Reprieve from Interest Charges
Most balance transfer cards offer a 0% introductory rate for a specific period of time. That translates to zero interest charges on the amount transferred to the new credit card which can go along ways towards accelerating your debt payoff. The introductory period can range from six months to as long as 18 months, and, obviously, the longer the period the better.
The caveat is that, if you apply and your credit standing doesn’t qualify you for the best terms offered, you may wind up with a credit card that charges a reduced interest rate for a shorter period of time. So, instead of getting 0% for 18 months, you may end up with a card that charges a lower rate, say 7.99% for just 12 months. Granted, that is probably better than what you might be paying currently. But, it’s just a Temporary Reprieve.
It’s very important to understand the complete terms of a balance transfer because the 0% interest rate will end and it will be reset at a predetermined rate, typically in the high teens or even low twenties. If that is the case, hopefully you used the 0% period to pay down as much of the debt as possible leaving you with less interest costs, otherwise, you will be right back where you started. If you have very good to excellent credit, you should be able to obtain a balance transfer card that offers a more reasonable post-introductory interest rate.
Don’t forget the Balance Transfer Fee
Most cards do charge a fee on the amount of the balance transferred, typically around 3%. Most have a minimum fee of $5, and some also have a fee cap of $50 to $100. The fee cap is important if you are transferring a large amount. In some rare cases, you might be able to find a card that charges no fee. The fees are sometimes deducted from the balance transfer or they are added to the balance to be paid at the end of the introductory period.
Shop and Compare
The Internet provides everything you need to quickly shop for the best credit cards and compare the terms of the balance transfer. Some of the best credit cards for debt consolidation right now are the following:
Slate from Chase
If you transfer a balance within X days of obtaining the card they waive the balance transfer fee and you pay no interest on transfers or purchases for 15 months. No annual fee.
Citi Simplicity Card
0% interest on transfers and purchases for 18 months. There is no annual fee, no late fees and no penalty rate on late payments.
Discover More Card
0% interest for 18 months on transfers and six months on purchases. You could qualify for a low post-introductory rate of 11.99%. No annual fee.
Citi ThankYou® Preferred Card
0% Intro APR on Balance Transfers and Purchases for 15 months, if you qualify.