This weekend an old friend and I were talking about one of my favorite subjects – money! A couple years ago, my friend got into the bad habit of living beyond his means and supported his habit by abusing his credit cards. After awhile, he wizened up and stopped using his credit cards – but the damage was already done. He had a couple thousand dollars in outstanding credit card debt and was having a hard time meeting the minimum monthly payments.
He eventually cut up his credit cards, stopped using them, started making additional payments, and stopped opening new lines of credit. Over the last year increased his FICO Credit Score by well over 100 points. Now he is planning on opening a new credit card, but this time it isn’t to spend money, it is to save money.
0% Balance transfer credit card offers
Credit card companies are always looking for new customers, and one way they attract new customers is by offering special deals including credit card sign up bonuses and 0% balance transfer offers. The 0% balance transfer offer allows new credit card holders to transfer current credit card debt to their new card and pay 0% interest for a set period of time – usually 6-12 months. That represents a huge savings for people who are currently paying over 20% interest on thousands of dollars of credit card debt. Some people can easily save a couple hundred dollars per month in interest alone. And that savings can be put directly toward the principle to eliminate debt more quickly.
Who should apply for 0% Balance transfer credit card offers?
You should only apply for a 0% balance transfer credit card offer if you are a responsible credit card user, meaning you pay your bills on time. Remember, the 0% interest rate isn’t an excuse to stop making payments – you still have to continue making at least the minimum payment or your rates will increase. You should use this as an opportunity to consolidate your credit card debt and eliminate it more quickly.
How to take advantage of 0% Balance transfer credit card offers
0% balance transfer credit card offers can be a great way to save hundreds, if not thousands of dollars in interest payments. But you need to make sure you do these offers the right way if you are going to do them.
These tips will help you save money on 0% balance transfer credit card offers:
- Watch out for fees. Many 0% balance transfer credit cards charge customers a fee to transfer a balance to their new card, usually around 1-3% of the balance, or up to a fixed amount, usually around $50-$75. But many people save more on their first month’s interest than the transfer fee, so you may come out ahead very quickly.
- Understand the terms of the balance transfer. Know when the dates start and stop, how much you can transfer, etc.
- Always make on time payments. Even one late payment can increase your interest rates to over 20%.
- Don’t make new charges on that card. Payments only go toward the 0% interest rate and you new charges will accrue interest.
- Set up automatic payments for your bills to prevent missing payments.
- Wait until approved before transferring money. Don’t transfer money to your new credit card until you get approved for a balance transfer and understand the terms.
- Pay attention to balance transfer limits. Don’t transfer more money than your limits allow.
- Best Zero Percent Balance Transfer Credit Card Offers. Check out this list for some of the top 0% balance transfer offers. You can check out more balance transfer credit cards at CardOffers.com.
A 0% balance transfer credit card can save you a lot of money if you play by their rules. If it helps your situation, then go for it. You can save thousands of dollars. But if you don’t have the discipline to manage your credit cards, then stay away.
{ 7 comments… read them below or add one }
These deals can be beneficial in the right situation but too often people use them as excuses to continue spending beyond their means. That is not a good thing.
Agreed. That’s why I mentioned you should only get a 0% balance transfer if you are already handling your credit cards properly. It shouldn’t be an excuse to spend more, but an excuse to get ahead of your payments and hopefully retire your debt more quickly.
I’m confident my friend will manage this well. He stopped using his credit cards over a year ago and has been aggressively paying them off. This should help him knock a couple months off his payments. His plan after that is to invest what he was paying the credit card companies. Hopefully he can get started while stocks are still relatively cheap!
I love balance transfers and find them an effective tool when used appropriately. But, my experience has been those who are in the 20% APR range usually do not qualify for 0%. Now, there are some exceptions – like those whose interest rates skyrocketed for one late payment, etc. However, to get the 0% you have to meet the credit card company’s credit requirements, and those who still offer this are pretty stringent about their lending policies these days. I think it’s important to find out what happens if you don’t qualify for the 0% and understand their guidelines before deciding to apply.
Great post, though Patrick!
we have been doing this for over 4 years. it started off as a plan to pay off credit card debt by paying off the highest interest first, then we had all balances at 0%, then after 2 years our debt was paid off and we started earning interest on the money! the interest rates are not great anymore, but, hey, it’s free $. this only works if you are organized and not tempted to blow the $ that’s earning interest for you. i have to admit it’s a little addictive
Jennifer, Many people call that credit card arbitrage. I know quite a few people who do it, but I didn’t mention it for a couple reasons: it takes a lot of organization to pull it off, more cards come with balance transfer fees, interest rates are lower, and balance transfer terms are often shorter.
But it’s a great way to make some free money if you can pull it off!
I have used these in both good and bad ways. During college, I did a balance transfer to clear on of my cards onto a 0% APR deal, but in turn it just lead my dumb ass to spending more on the freshly cleaned card. Yes, I was the dumb college student. Fast forward to 5 years later, I recently cleared all my credit card debt by consolidating 3 cards into 1 balance transfer and paid of the debt much quicker. I am utilizing only 2 cards now and doing a little better with my credit card discipline.
It can definitely be tool to help rid yourself of debt. It also has implications on your credit score as new inquiries count against you but utilizing a lower percentage of available credit helps. Something to keep in mind before going on an application frenzy if you aren’t confident you will qualify.