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If you want to get out of debt, you need to have a plan! It’s time to escape the endless cycle of high-interest credit card debt by getting serious about debt reduction and choosing an approach that will work for YOU. That’s where a 0% balance transfer credit card might help.
No matter if you’re using the debt snowball or debt avalanche pay down method, what matter most is choosing a plan that works for you. Let’s talk about balance transfer credit cards and how it might be able to assist you in getting out of debt faster…
Why Get a 0% Balance Transfer Credit Card?
Some credit card issuers offer credit cards with an introductory 0% APR (annual percentage rate) on balance transfers for a limited amount of time, typically around 15 months. This means that you can transfer over balances that you have with other credit card companies that may be charging you anywhere between 16% and 23% APR on your balance. You might even have an interest rate closer to 30% if it’s a penalty APR!
Finding some relief from sky high interest rates by utilizing a balance transfer card can give you a significant boost towards your ability to pay down that credit card balance once and for all. After listing out your debts (a site like Undebt.it can help you there) and the annual percentage rates you are currently paying, consider whether a balance transfer credit card is right for you.
Also, if you’re just starting a business (or side hustle), a lot of business credit cards have 0% intro periods for transfers *and* new charges. So you can start spending on things that will pay off later. Here are the best credit cards for consultants and contractors, many of which offer 0% periods!
0% APR Balance Transfers are Band-Aids
It’s important to note that a balance transfer card isn’t a cure-all. There are a few key things you’ll want to remember before you start applying for a new card and transferring your balance. Once you are approved for a 0% APR card, remember not to lose that intense desire to pay down your debts during that low introductory period. Avoid the trap! Your debt may not be accruing additional interest at the moment, but the balance is still there and it’s going to require focus and discipline in order to get rid of it.
Think of it like gathering all your dirty dishes and putting them in the sink. They are contained and not getting any dirtier, of course. But you still have to get the soap and a sponge and set about the hard work of getting them clean. Don’t think that just because you have a temporary 0% interest rate thanks to that balance transfer that you can kick back and take it easy.
Related: All the credit card best practices you should stick to.
Warning: Your Credit Score Might Suffer
In addition to opening a new card which might cause your credit score to drop slightly, remember that credit utilization makes up almost a third of your credit score. So if you’re looking to transfer multiple balances over to a new card, your credit score could be negatively impacted.
It’s generally recommended that you use no more than 30% of your available credit so that your credit score won’t be negatively impacted. So if you have a card with a credit line of $10,000 ideally your balance transfer wouldn’t be more than $3,000. That being said, the ding to your credit score is a small price to incur on your path to paying much less overall in interest.
Don’t let the fear of your credit score taking a minor hit keep you from doing a balance transfer of your credit card debt that could save you hundreds in interest charges.
Bonus Read: Ways to boost your credit score
Best Balance Transfer Credit Cards We Recommend
We’ve listed 4 of our favorite cards below, and ALL of them have a $0 annual fee. While it might be tempting to choose a card based on rewards points or cash back, remember the main reason you are applying – to get a balance transfer that works for YOU.
Citi Simplicity® Card
It’s also one of my favorites because it doesn’t have any late fees, there isn’t a penalty rate, plus it doesn’t have an annual fee- ever! How great is that?! This truly is a card that was designed to help consumers escape the endless cycle of making a few purchases and watching their balance swell due to the countless sneaky fees and penalties.
Of course there is the standard balance transfer fee that you can expect. Be prepared to pay 3% of the amount transferred. And it’s also worth noting that this card has a 3% foreign transaction fee so don’t plan on any global jet-setting.
But the card_name does one thing, and it does it well. So if your goal is to finally eliminate that pesky debt that you’ve been keeping around like that stack of coupons you keep in your junk drawer, then this is the card for you.Capital One Quicksilver Cash Rewards for Good Credit
For example if you’re transferring $6,500 over from another card, you’ll get hit with a $195 transfer fee, but after you meet the three month spend requirement by making your regular purchases with that card, you’ve effectively eliminated that fee.
And you’ll also earn an unlimited 1.5% cash back on every purchase moving forward with no annual fee! The rewards make the card_name a really attractive card.Come for the 0% transfer, stay for the $0 annual fee and cash back!
Citi Double Cash® Card
It’s important to note that balance transfers do not qualify for cash back. Only new purchases if you are planning to use the card ongoing.
Chase Freedom Unlimited®
- Earn 5% cash back for travel booked through the Chase Travel portal
- Earn 3% cash back at restaurants and drug stores.
- Also get 3% cash back on eligible delivery services.
**For more recommended Balance Transfer cards, see a complete list here**
Typical Fees for Balance Transfers
For the vast majority of 0% APR cards out there, you can expect to pay a fee in order to transfer your balances over to the new card. Typically this fee is relatively small at 3%. Compare that to the massive benefit that you’ll receive by not having to pay any interest for at least a year!
Something that rarely gets mentioned is that you also have the ability to negotiate those transfer fees too. Be sure to arm yourself with the knowledge of how much you’re looking to save. It may not be worth your time to try and negotiate down $30 if you have a $1,000 balance. Calling about $300 on a $10,000 balance, however, is a different story. Just make sure that you negotiate that lower transfer fee with the credit card company before you make that transfer.
In the past, there have been a couple of rare cards that don’t charge any fee at all, so depending on the size of your balance transfer, these cards could save you a big chunk of change! However, make sure that you read the fine print as there may be limits on the maximum amount that you can transfer over to your new card. The timeframe is often limited when you need to make that transfer in order to have that fee waived also. If you miss that window you could be stuck with a 3% or potentially even an even stiffer 5% transfer fee. Yuck.
It’s Crucial to Make Your Payments On Time!
In order to keep that 0% APR, you need to make sure that you are at least making the minimum monthly payment on time, every time. If you do miss a payment, your new credit card could easily repeal your introductory zero APR period. And now you’re thrust back into a sky-high interest rate. But just because you can pay the minimum doesn’t mean that you should. So get after it and pay way more than just the minimum, RIGHT?
Do the math to ensure you’ll pay your entire balance off while you’re taking advantage of paying no interest, because once that sweet 0% introductory period is over, you’re back to paying regular annual percentage rates. It is a great idea to enroll in any auto-pay feature your card might offer so you don’t forget to make payments in the exact amount you need to in order to reach your goal.
Another recommendation is to set calendar reminders so that you can keep tabs on how many months of zero interest you have left to make sure the numbers are lining up. Who knows, you might even realize you could be paying it off even faster!
The Bottom Line:
Balance transfers credit cards are by no means the perfect solution to your credit card debt problem, nor should it be the first step you take. Read our full post on creating a debt payoff plan to learn about all the things you need to do first. However, once you have a plan and are committed to paying down your balances, a 0% APR balance transfer card can give you that extra boost to finally say farewell to your credit card debt for good.
Related posts:
- Best credit cards for unemployed people (and those rebuilding credit!)
- How to rebuild your credit worthiness
- Best Credit Cards for Stay at Home Parents
*Advertiser Disclosure: How to Money has partnered with CardRatings for our coverage of credit card products. How to Money and CardRatings may receive a commission from card issuers. Some or all of the card offers that appear on the website are from advertisers. Compensation may impact on how and where card products appear on the site. Lastly, the site does not include all card companies or all available card offers.
*Editorial Disclosure: Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities.
*User Generated Content Disclosure: Responses are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.