If you are carrying high interest credit card debt your best option, if it is available, may be to transfer it to a zero interest balance transfer credit card.
If used wisely, it’s a great opportunity to lower the cost of your debt so you can pay it off faster. If used unwisely, it can actually increase the cost of your debt over time. The decision to use a zero interest transfer credit card should be based on a deliberate strategy to eliminate your debt, not simply to kick the can down the road. Before taking the leap, there are a few things to consider when transferring your credit card debt:
Your Credit Score is the key
If your credit score is not in the upper tier (720 to 850), you could still receive a 0% introductory rate offer; however, you may not actually be approved for the best available terms. For instance, if the offer is for an 18 month introductory period, you might only be approved for a six month period if you have a lower credit score. Or, you could very well receive an APR above 0%. Your credit score will also determine the post-introductory APR which is what you will continue to pay on any remaining balance. The bottom line is that you need to get your score up as high as you can in order to ensure you receive the best terms.
You need the longest introductory period available
For the strategy to work, you need to get a zero interest balance transfer credit card with the longest possible introductory period. It’s not realistic to expect to eliminate your debt with a six-month introductory period. At a minimum, you should get a 12-month period, and there are some 18-month periods available. With a 6 to 9-month period, unless you can substantially increase your monthly payments, you are probably just kicking the can down the road.
Don’t forget the balance transfer fee
Nearly all balance transfer cards charge a transfer fee. While you might find a card that doesn’t charge a fee, they are few and far between and generally only offered to the most credit worthy borrowers. Most cards charge 3% and some can be as high as 5% which can add a chunk to your balance. Look for cards that cap the fee at $75 to $100.
Put everything you can into paying off the balance transfer
That should be the goal. If you can get 0% interest for 12 to 18 months, why not put everything you can into paying off your debt as cheaply as possible. At a minimum, you should pay no less than the amount you were paying on your existing credit card. And never, ever just make the minimum payment on your zero interest balance transfer credit cards. If you do, chances are your debt costs will increase when the introductory period expires.
Do not make any purchases on your Zero Interest Balance Transfer credit cards
Remember, the goal is to eliminate the debt. Even if your zero interest balance transfer credit card offers 0% on purchases, you should avoid it because the post-introductory APR could be higher than what you are paying on your existing card.
Don’t stop paying on your existing credit card
If you are approved for a zero interest balance transfer credit card you need to continue to make payments to your existing account. It could take up to three months for the transfer to be completed. You don’t need any late payment fees or dings to your credit score.
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