Today’s money tip is about moving your high-interest debt to a a 0% balance transfer credit card.
Everyone want to repay their debt as quickly as possible, especially short term consumer debt, such as the debt that results from unpaid credit card dues. This is because consumer loans charge very high interest rates and the debt can quickly multiply and get out of control. One of the debt repayment hacks we covered on this blog is to ask your credit card company to lower the interest rate they charge on your outstanding credit card dues, which would theoretically make it easier to repay the debt as it does not multiply as quickly as it would have at the higher interest rate.
We also shared some bargaining tactics that may help you negotiate a lower interest rate on your credit card, such as leveraging your loyalty, highlighting responsible credit card usage, sharing market data about competing credit cards with better interest rates and finally, telling the credit card company the only way to prevent a default on your debt is if the interest rate were lower. These negotiation tactics are likely to work in your favor – but there is a chance that your requests for a lower credit card interest rate will fall on deaf ears.
If your credit card company refuses to reduce the interest rate on outstanding dues, you can consider moving your high-interest debt over to a 0% interest balance transfer credit card.
This move could save you hundreds of dollars (depending on your outstanding dues) because the payable about of credit card debt will be significantly less in the total absence of an interest rate and you may be able to repay the debt faster. That’s two birds with one stone!
3 things to be aware of when considering a balance transfer to a 0% Credit Card?
This too-good-to-be-true deal does come with a few constraints that you should be aware of before making the decision to switch your credit card.
- You only have a limited amount of time to repay the debt (perhaps a year or two at most) after which you will be charged with a higher interest rate. You must promptly repay the credit card debt, therefore, in order to truly benefit from the zero rate credit card deal.
- A balance transfer fee is usually charged on the credit card debt, so that figure should be factored into your decision. Read more about this in the report titled, Credit Card Offers: What’s the Catch? published by Consumer Protection Division, Maryland Attorney General’s Office.
- The deal may not be available to credit card users with a low credit score or poor credit rating, in which case, consumers may be able to move to a credit card with a ‘lower interest rate’ compared to their current card.
Deciding which zero rate balance transfer credit to apply for is a task that requires a bit of analysis on your part in order to determine the best possible deal. Compare cards based on the length of the 0% interest rate as well as the balance transfer fee. Always read the fine print to understand the risks you are undertaking and the consequences of missing a payment or not fully repaying the debt once the 0% promotional rate has expired.
Best wishes on your journey to repaying all your credit card debt!