Balance Transfer credit cards: You’re ticket to no interest (ever)

This guest post was written by Jason Bushey. Jason runs the day to day operations at Creditnet.com

Long ago, before I had much use for credit or any personal finance expertise whatsoever, I had a friend who was studying to be an accountant. I’m not really sure how the topic came up, but at some point we started talking about credit cards, of all things. (Odds are it was a very slow night in the dorms.)

That night my accountant friend gave me a tip that, unfortunately, I waited a while to listen to. What she told me is that you could move your credit card balance from one card to another, and that you should never pay interest on a credit card. Ever.

I remember thinking this was pretty cool, but at the time I hardly ever used my credit card and hadn’t noticed any interest charges in the first place. So I went back to reading Faulkner or playing Halo … whatever it was I was doing before she walked in.

Fast forward to a couple of years later, where I had a small but semi-significant balance on my credit card that simply was Not. Getting. Smaller. Finally, I looked up the APR I had been paying for the better part of two years and realized why I couldn’t seem to get that balance lowered: my APR was a whopping 24.99%!

I should mention that this credit card was my very first one. I had received the offer in the mail when I was 19 and, before I had a chance to rip it up, my Dad sat me down for “the talk.” And no, it wasn’t about birds or bees. (We were beyond that one.) It was about building credit. So, he convinced me to open up the credit card -on my own. This was 2006, the “glory days” of carefree lending, if you want to call it that. (No co-signor? No problem!) I started with a whopping $250 credit line.

Somehow, over the course of a few years I had managed to turn my $250 credit line into a $350 balance I couldn’t shake. It was then that my friend’s golden advice dawned on me – TRANSFER YOUR DEBT, IDIOT.

Like my credit card balance, the rest is history.

How to Use Balance Transfers to Lower The Interest Paid to Credit Card Companies

So, personal stories aside, here’s how a balance transfer credit card can help you to pay back your debt directly, interest free for as many as 18 months.

Here’s what you’ll want to consider when choosing the best balance transfer credit card for your debt situation…

1.)   How much debt do you have?

Many balance transfer credit cards have a limit to how much you can transfer over. If you have a lot of debt, then obviously you’ll want to consider balance transfer credit cards with the highest amount you can transfer.

2.)   Come up with a realistic plan for how quickly you can pay back your debt.

One of the most important things you’ll want to consider when choosing your balance transfer credit card is how long the intro APR is. Some credit cards offer three months, while others like the Discover More – 18 Month Balance Transfer Promo Credit Card are far more generous. Once you decide exactly how much you can pay back each month on your credit card, you’ll have a better idea of which credit card intro periods you should be considering.

3.)   Important: Make sure the 0% interest period includes balance transfers!

This one’s obvious, but it’s a biggie. Before you submit the application for your new balance transfer credit card, you should be 100% certain that the card you’re applying for includes balance transfers under their 0% APR promotion. Many credit cards carry this Intro bonus over for purchases only; do your research and read the fine print before clicking “Apply.”

4.)   Transfer your debt over immediately

0% balance transfer promotions don’t last forever, so get crackin’ on paying that debt back as soon as you receive your new card. Odds are you’ll have to pay a small fee (generally it’s in the “3% or $5 – whatever is greater” range), but that’s probably only a fraction of the interest you’re paying each month. Finally…

5.)   If you can’t get it all paid off the first time around, pass it on once more to a new card

That’s right; if at first you don’t succeed, try again. (And harder.) If you run out of time paying back your debt before your 0% promotion runs out, simply transfer that debt over to yet another balance transfer credit card. It’s that simple. Opening a new credit card will improve your credit, and you can continue to pay back that debt interest free

It’s like my accountant friend once told me: “You should NEVER pay interest on a credit card.” Only unlike me, I hope you’ll listen…

Check out our pick for the recommended balance transfer credit card – the Citi Simplicity Card – on Creditnet.com.

3 Responses to Balance Transfer credit cards: You’re ticket to no interest (ever)

  1. Your article doesn’t really address why people get into debt. Bt transfer is a short term strategy but without addressing the underlying reasons why people are in debt, you won’t necessarily get out of it just by having a lower interest rate. I utilized this strategy, but had a clear plan to be out of debt. I got a higher paying job but lived a more humble lifestyle than before. The extra money I saved went to pay off the debt. I seriously concentrated to making the monthly payment goals to pay off the debt before the 0% apr ended. It takes some serious sacrifice and painful adjustments in your life. It’s worth it though because not having debt is a pretty awesome feeling… You don’t know what freedom is until you are.

    Remember, if your bt fee is 3% for 18 months, then think of your apr as 2% if you pay off your debt on that card in exactly 18 months.

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