0% Balance Transfers: The Secret to Getting Out of Credit Card Debt

balance transfer credit card

Losing weight, getting a new job, and getting out of credit card debt all seem to be among the more popular New Year’s resolutions. And while those are great goals, they’re considerably easier said than done, which is likely the reason so many people fail in their resolution attempts. Getting out of credit card debt, for example, can only be accomplished by writing a large check to your credit card issuer—or is there actually an easier way?

The reason it’s so hard to get out of credit card debt is because normally the amount of monthly interest that accrues is close to the minimum monthly payment. So, if you’re stuck making nothing but the minimum monthly payment it will take you years, maybe even decades, to get out of the debt. And, that’s assuming you don’t use the card any longer and your interest rate doesn’t go up.

0% Balance Transfer Offers

Enter the zero percent balance transfer offer. Most, if not all, large credit card issuers are marketing zero percent balance transfer credit cards. The credit card issuer will allow you to transfer your interest accruing balance from your existing credit card to a newly opened credit card that has a zero percent interest rate for a pre-defined promotional period. Most of these no-interest cards will allow you to carry the balance, for free, for between 6 and 18 months. And what’s better than free money?

The practical application of zero interest is that every month your minimum payment would go towards actually paying down your balance, rather than simply paying interest on the balance. That means you’ll be able to pay down your balance faster than if you had an interest rate greater than zero. And, if you’re able to throw more than just the minimum payment at the debt, you’d be surprised how quickly that balance will drop.

Focusing on the End Goal

One important factor to keep in mind when considering a balance transfer card specifically for the purpose of getting out of credit card debt is to focus on the end goal: paying off the debt before the introductory period ends. This means not using the card to run up additional debt while you’re paying off the balance. And whatever you do, don’t make the mistake of running up debt on the old cards that you’ve transferred the balance from. This will only make matters worse and defeat the whole purpose of utilizing a balance transfer to save on interest, and ultimately, pay off your credit card debt.

Shopping for the Best Balance Transfer Card

When you’re shopping around for the best balance transfer credit card it’s important to remember that credit card issuers aren’t throwing them around to just anyone.  You have to have good credit (or better) in order to qualify.  Remember, credit card issuers mitigate their risk with interest.  But because these cards have no interest for an introductory period of 6-18 months, they can’t issue them to consumers who have bad credit.

Further, if you’re using the balance transfer card as a strategy to get out of expensive credit card debt then you should choose one that has a longer “zero percent” grace period. That might result in you being asked to pay a balance transfer fee of 1-3% of the balance. Don’t let that dissuade you from taking the offer. The cost of a balance transfer will pale in comparison to the interest that you won’t be paying.

Visit Credit Sesame’s interactive credit card finder to find a balance transfer card best suited for you.

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Published January 28, 2014
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