During the 0% balance transfer credit cards craze of the last several years, many of my friends were calling me crazy for not taking advantage of free money. The idea was simple. Apply for a few credit cards offering 0% balance transfers, make the transfers to a high yield savings account and pocket the difference in interest.
The tactic worked well, earning them a couple hundred dollars before taxes per card. However, I never bothered. It seemed weird. It just wasn’t me and subsequently, I never talked about it here.
Last week, a reader wrote me an email that really changed my mind about these 0% balance transfer cards.
David, you have to write about these 0% balance transfer credit cards. I used one and it helped pay off my debt a year ahead of schedule
Whoa. That got my interest.
The 0% Balance Transfer Story
Apparently, my reader Shelby (fake name as she requested to stay anonymous), used these cards to transfer all her credit card debt onto 2 cards with 0% interest. Then instead of spending more money, she tried her hardest to pay them off. It was a great strategy (minimum work, significant benefit) and based on her calculation, the lack of interests helped reach her credit card debt free goal 394 days ahead of time.
She said more people should take advantage of these offers to get out of debt and I totally agree. All you need to do is apply for 0% balance transfer credit cards and watch your debt shrink much more rapidly. To get started, here are two choices you must consider.
Citi Platinum Select MasterCard
- 0% APR on Balance Transfers for 6 Months
- Rate on Purchases are also 0%
- No Annual Fee
- $0 Liability on Unauthorized Purchases
Click Here to Apply for the Citi Platinum Select MasterCard
Discover More Card
- 0% APR Balance Transfer for 6 Months (Note that the 12 Months Info You See Everywhere Else is Wrong, This Cards Offers 6 Months of Balance Transfer, Not 12 Months with 5% Transfer Fee!)
- 5% Cash Back Bonus in Categories like Travel, Home Improvement, Department Stores and Gas
- 5% to 20% Cash Back If You Buy Through Their Exclusive Online Store
- Up to 1% Unlimited Cash Back on All Other Purchases
Click Here to Apply for the Discover More Card
Bonus – For a limited time, Discover will give you $50 cash back bonus after you make $599 in purchases during the first three months. It is only available through this special offer and I’m not sure how long it will last, so go get the free money while it’s still available.
Note: The only way to take advantage is to make sure you still try to pay off your debt as quickly as possible. Do just that with these 0% balance transfer credit cards and you will be debt free like Shelby in no time.
- Citi Platinum Select MasterCard – Official Application
- Discover More Card – Official Application
What is a 0% Balance Transfer?
An insightful and exciting way to decrease the burden of credit card debt, while at the same time not having to pay exorbitant interest fees, is to take advantage of a 0% balance transfer credit card offer. Sure, this may seem like a foolish exercise in futility at first glance – taking out a new credit card account to get rid of credit card debt – but nevertheless, the fact remains that this can be a remarkably effective tool in your arsenal when you want to save money and diminish credit card debt.
A 0% balance transfer is a marketing tool used by credit card companies to increase the number of customers holding accounts with them, and also increase the amount of debt held within those accounts. While these balance transfers are effective for the credit card companies, they also can be a powerful aid to customers who wish to save money and pay off credit card debt. This is how the process works:
First, a customer opens a new credit card account that offers a 0% interest balance transfer program. These are not usually difficult to find, although there are variables about which customers should be aware. Some balance transfer offers are considerably longer than others, and in this case, longer is definitely better. In addition, customers would be well advised to pay close attention to the interest rate after the period of zero interest expires. It will, of course, be increased. However, some companies will charge incredibly high rates after the end of the initial period with no interest. Because of the importance of these types of details, it is absolutely vital that a customer read the fine print very carefully before deciding which credit card offer to accept.
Once the new account has been opened, customers will usually find the telephone operators with their new credit card company more than willing to assist them in transferring the balances to their new account. This is to be expected, of course, because they want as much of that money transferred into that account as possible – right up to the limit! How that account is managed after the transfer is what will make the difference in how much money is saved over the course of the zero interest period.
Once the new account has high-interest funds transferred in, this is the best time to pay down that balance as aggressively as possible. By doing this, customers may be able to completely pay off much of the credit card debt without incurring any interest fees at all, saving significant amounts of money. It is, however, vital to remain aware of when the zero interest promotion ends! In the event that there is still a balance remaining on the transferred balance as this time period comes to a close, it may be possible to open a 0% balance transfer credit card with another company, and continue the cycle further. Again, looking out for the longest period with a 0% balance will help you to diminish debt and save money.
How to Calculate When Using a 0% Balance Transfer Makes Sense
When deciding what to do about your debt, one common question is how to calculate when using a 0% balance transfer makes sense. 0% balance transfer credit cards are promotional offer that creditors extent to attract customers. The offer permits you to transfer balances from other credit cards onto the new card at an amount up to your credit limit. You will pay 0% interest on the money transferred for a set period of time, usually between six months and one year. After this period of time, any remaining balance will default to the normal interest rate, under the terms of most cards. Most 0% balance transfer credit cards charge you a fee to transfer the balance. The industry standard is a 3% fee. This fee used to be capped, which meant that there was an upper limit maximum that would be charged. However, with the recent credit crunch
Calculating Whether 0% Balance Transfer Credit Cards Makes Sense
Your first consideration when calculating whether the 0% balance transfer credit cards make sense should be determining whether you will save enough in interest to make the 3% fee worthwhile. This will depend on the amount of money you owe and the interest rate you are currently paying.
Interest rates on credit cards can vary widely from around 5% to upwards of 20% depending on your credit score and a number of other factors. This will make a vast difference in determining whether a balance transfer makes sense in your situation or not.
Assume, for a moment, that you have a 5% interest rate. If you have a $1000 balance, that means that you are paying 5% annually on a $1000.00 balance. Although there is some variation on how creditors charge interest- some charge interest on a double month cycle- you will pay approximately $23.37 in interest over a 6 month period. This number was calculating assuming you are making minimum payments of 3% per month of the balance remaining. If you are making larger payments, you will pay less in interest. Over a one year period of time using the same calculations and assuming the same payment rate, you will pay $42.79 in interest over the course of the year. This means that if the balance transfer offer is good for six months, a balance transfer may not be right for you, since you will pay a $30.00 fee (3% of $1000) to save $23.37 in interest. However, if the balance transfer offer is good for one year, then a balance transfer will safe you about $12.00. While this is a savings, only you can decide whether that amount of money is worth the hassle of transferring a balance.
If your interest rate jumps to 15% on your credit card, the numbers look a bit different. Again assuming a $1000 balance and payments at 3% per month, you are now looking at $71.66 in interest over six months and $134.94 in interest over the course of a year. Assuming a 3% balance transfer fee of $30.00, the offer begins to look a bit more attractive.
If your credit card interest rate is 20%, with all other factors the same, you will pay $96.59 in interest over 6 months and $184.48 over one year. In this situation, a balance transfer begins to look as though it might make sense.
Therefore, it seems clear that the higher the interest rate, the wiser it is to do a 0% balance transfer. The same rule applies for high balances. If you had an $8000 balance on that same 20% card, over the course of a year you would pay $1475.89 in interest. This is quite a bit more then the $240 balance transfer fee you would pay.
Other Things to Consider about 0% Balance Transfer Credit Cards
One other major factor to consider when making the calculation of whether a 0% balance transfer credit cards make sense is whether you can actually pay the balance back within the promotional period. If you have, for example, an $8000 balance, you would need to make credit card payments of over $1330.00 per month in order to have that balance paid off within a six month promotional period. If you do not have that kind of cash lying around, you need to consider what happens when the promotional rate ends.
Typically, when a promotional rate ends, you will just have to begin paying at the regular interest rate on the remaining balance. Thus, you would need to look at what that standard interest rate was in order to determine how much you should expect to pay in interest on the remainder of the transferred balance after your promotion ends. You can do this by figuring out how much you can pay per month and subtracting that amount form the total owed. So, if you were able to pay $200 a month on your $8000 balance, at the end of six months you would still have $6800 remaining on your card. Find out what rate will be charged on that remaining balance. If the rate is higher then the rate you have now, it might not be advantageous for you to take the balance transfer offer unless you are absolutely confident that you can pay off the balance within the promotional period.
Be diligent about ensuring that you really can pay off the money within the promotional period. Do not be late on your payments or otherwise default on any agreement with the credit card company or you may find yourself spending much more money when your rate defaults to a penalty rate under the terms of the contract. Finally, do not count on simply being able to transfer the balance again at the end of your promotional rate. After the economic crisis of 2009, the days of easy credit and endless balance transfer offers are no more and there is no guarantee that at the end of your promotional term, another balance transfer offer will come along.
0% Balance Transfer Strategies – Saving Money and Improving Credit
Credit card debt can be beaten, but it takes a plan to make headway against the interest rates that keep boosting the balances higher and higher. One of the very successful ideas for saving significant amounts of interest money – while still paying down the credit card debt – is through the completion of a 0% balance transfer. This type of strategy makes it possible for the payments made by the consumer to actually affect some change in the balance, rather than being constantly applied to the interest charges. But what are the options and benefits for this type of financial strategy?
First off, there is the obvious step of using the balance transfer of high-interest credit cards to the zero interest rate, so that it can be paid off while saving money. This is a great idea. Some offers will include six months at zero percent interest, but others may be as long as a year. That is a golden opportunity to make progress removing credit card debt without paying interest. Balances will go down much quicker that way! Some customers will even move balances from one zero balance account to another, as the first one expires, to continue the trek toward freedom from consumer debt.
If timed correctly and approached with diligence, even a significant amount of debt can be paid off without interest charges over the months or even years… assuming additional 0% balance transfer offers can be found. Customers should be aware that there may be fees affiliated with the initial balance transfer, but these costs are relatively insignificant when compared with the interest saved over time!
One nice element to this strategy is that the credit card companies do not make it difficult to transfer the funds from a higher interest account to the new zero interest account. They will often even assist with the transfer themselves, so anxious are they to get the funds into their own accounts. The companies, of course, are hoping that the customers will not be diligent or disciplined enough to make a significant dent in the balances, because the interest rate will go up again at the end of the introductory zero percent rate. It is up to the consumer to make sure that they are able to remain aggressive in making those balances disappear.
There are other strategies to consider when dealing with the 0% balance transfer offers, as well. For example, keeping the credit card account from which the balance has been transferred open, rather than closing it immediately, can have longer-term beneficial effects on the credit rating. This is one reason to consider keeping these accounts open, even if the account will not be used immediately – or ever. Closing the account may keep the credit card company from reporting positive information about the customer to the credit bureaus. Taking every aspect of the 0% balance transfer option into account can make it a very positive transaction in many ways!
How to Choose a Credit Card for a 0% Balance Transfer
The idea of saving money by paying off credit card debt is a great one – in fact, it is possible to decrease the interest rate on a debt balance by taking advantage of 0% balance transfer credit cards. This strategy is extra helpful for consumers who are interested in decreasing their amount of credit card debt, in large part because it is effective at keeping those pesky balances pegged at the same (very low!) rate while they are being paid off. Trying to pay off these debts while they are accruing interest is both frustrating and incredibly slow. This is because for every payment you make as a step forward, you also are forced into a step backward due to the interest charges. But how does one tell what credit card to use to escape a process like this?
There are a few things to look for in deciding which credit card account will make the best initial step toward saving cash with a 0% balance transfer. The first is rather obvious, but important… try to find a credit card offer which advertises a zero percent interest balance transfer plan as part of the marketing plan. There can be a number of different sources for finding these offers. Some zero percent balance credit card offers can be found in advertisements and mailings that are sent through the mail. Others will be marketed via email or other Internet sources. Still others can be seen through offers on the television or radio. Once a customer can find a few of these 0% balance transfer offers, it is possible to do some comparison shopping to find the best fit.
One of the biggest considerations for these credit card offers is the length of time that the company keeps the balance transfer(s) at zero percent. Certainly, the longer the balances stay at that low rate, the more money you can save by paying them off during that time! It is worth noting that the period at zero percent may last as long as a year in some cases, while others may last as little as a couple of months.
This is one consideration in choosing the credit card offer that will make the most difference in a 0% balance transfer.
It is also important to compare the rates for balances transferred to the card after the initial period of zero percent interest has expired. For example, it might be a wise move to avoid opening a credit card account that balloons up from zero to incredibly high rates at a later date. Of course, the rate will be expected to increase, but compare these rates against each other before selecting your account.
Finally, it is good to compare the credit limits for balance transfers. A card which offers a long period at zero percent, and a competitive interest rate thereafter, may still be a dud for a 0% balance transfer if it has a credit limit of $500 and the consumer wishes to transfer $2000 of debt! By comparing the offers against each other, a consumer can find the best situation for his/her zero interest balance transfer, and save money while decreasing debt.
- Citi Platinum Select MasterCard – Official Application
- Discover More Card – Official Application
More Tips on 0% Balance Transfer
One of the most effective methods that savvy consumers are using to make a sizable dent in (or even completely eliminate) their credit card debt is through the strategic use of a 0% balance transfer credit card account. That sounds a little counter-productive to many people, since it involves opening a new credit card account to begin with! However, this strategy makes it possible for high-interest debt to be paid down without suffering excessive interest charges, and therefore makes the pay off a much faster process overall! However, it takes some definite organization in order to use a zero percent balance transfer most effectively. Consumers who rush in without understanding the details of their balance transfer can wind up costing themselves money in the long run… rather than making significant headway toward saving money and eliminating debt. In order to make the most progress, consider the following steps regarding 0% balance transfers.
First of all, it is important to find any and all 0% balance transfer offers. In some cases, this seems to be getting more challenging! As fewer credit card companies offer this particular perk to entice new customers, discovering the companies that offer these zero percent balance transfer proposals becomes as good as finding a goldmine. Many of these offers cover roughly six months with the transferred balance at zero percent interest. However, in this type of situation, longer is better. You may even be able to uncover companies that offer the zero percent interest rate for up to a year! Having zero interest for that period of time offers a perfect chance for wise consumers to generate some significant progress in eradicating credit card debt.
These 0% balance transfer offers can be found in many different places. For example, some relevant advertisements can be seen on the television or heard on the radio. Other credit card offers come through the postal service as direct mail advertisements. Still others are to be found on the Internet, either through email advertisements or even with search engines. The important thing is to find as many offers as possible, so that a good comparison can be made between them. Considerations such as the length of the zero percent interest offer, the interest rate following the introductory rate, and fees associated with the balance transfer should be noted and compared before a final decision is made on which credit card account to select.
Customers will notice that completing these balance transfers can be relatively seamless. The credit card companies are more than happy to increase the amount of debt carried on their accounts, so their telephone operators are trained to be overly helpful and friendly in this kind of transaction! While most credit card customers tend to lack the discipline needed to make progress in paying down debt while there is not interest accruing, make sure that you are the type of customer who is determined to diminish debt – and save money – with your 0% balance transfer credit cards!
{ 41 comments… read them below or add one }
Interesting concept.
Just be careful. Many credit card companies have wised up to this and now charge a transfer fee of 3% in addition to another $50 or $75 fee.
In addition, the devil is in the details. Read the fine print. Many of these cards only allow the 0% for a short period of time, say 6 months.
In addition, many place interest rate escalation clauses into the fine print. Miss a payment or be late on a payment and that 0% rate skyrockets to 25% or more.
May sound easy. Just pay your bill on time every month.
Yet even here credit cards have gotten sneaky. Many arbitrarily change the payment due date.
Recently it has been widely reported that Discover Card is doing just this moving the payment date up 4-5 days.
This concept can work you just have to pay CLOSE attention to the fine print of the offer.
Thank you! I haven’t really thought about using the 0 balance transfer cards this way and it will be something I need to try. I agree with Charlie though that it won’t be as easy as your reader made it sound though. However, as long as you pay the minimum during the 12 months, you should be just as “at risk” as leaving the balance on whatever card you have right now.
Yeah, the only ones I’ve seen charge like 3-5% on the initial transfer.
There aren’t many so that’s why I suggest the two options above. They offer 0% balance transfers for the first several months. It may not sound like a lot but a couple % for the year is money in our pockets.
Glad to hear a success story of someone using the credit card companies, instead of being used by them! Tip top– Shelby!
Thanks for this blog. I figured it out and even with the 3% balance transfer fee, it is still cheaper than paying interest for a year at 10.99%.
This will help me meet my goals sooner!
Dude, I go for the 0% and $0 fee ones!
-Mike
The two up there are exactly those. 0% and $0 fees
On top of that, Discover is giving away $50 once you make $500 in purchases so it’s free money on top of free money!
To bypass the 3% transfer fee simply get a card that offers 0% on balance transfers and new purchases.
Then, don’t do any balance transfers. Freeze credit card purchases at your other interest rate charging cards, make purchases w/ the new 0% card, make minimum payments on the promotional card and funnel all of your money to the other cards charging you interest.
This could be a good strategy if you can pay off the interest rate charging cards in a small amount of time.
This could be good but if you have a old credit card the please do not close the account as this may affect your credit score.
David, the idea of using a 0%/0% card for a small business loan has got the wheels turning in my inventor’s brain. I have a product prototype ready for market and need about $10k for ordering parts and materials to build a few to fulfill orders (these are $6k lab bioreactors for growing and studying algae as a source of biodiesel).
My credit is excellent, no balance due on my MC. What is the step by step procedure for getting the $10k from a new 0% card? Do I borrow directly from the new card or use the old one then transfer right away?
Thanks for the inspiration.
Dan
If you are using it to order parts, then just use the card to buy the products and then pay the minimum. However, make sure that 0% credit card you are using is:
1. 0% for purchases
2. If it’s just 0% balance transfers, you may need to buy it from card A, then transfer the balance to the card that offers the 0% balance transfers. The important thing is to read the fine print though, because some cards charge interest on the initial transfer while others don’t. Also, I’m pretty sure all of card companies require you to pay at least the minimum every month in order for the 0% offer to still be extended.
Lastly, beware of how long your 0% is good for as it’s very easy to forget and be one day hit with high interests.
Most importantly, good luck with your business idea! When you strike it rich, remember to come share your story with us.
Unfortunately that one time payment and 0% is a rip off. Think about it, after they charge you 3% on whatever balance you transfer or $100.00, you still make some payment every month, like clock work. They made their money when you transfered the balance. That money you pay to transfer can go towards payment to your card. That $100.00 will reduce whatever balance you owe by $100.00.
MoneyNing, I love your blog! Just bookmarked it so I can read and wise up for the future
)
Yesterday I got approved for the Citi Platinum MasterCard with the 0% APR on balance transfers and should be expecting the card in the mail in 4-7 days. My credit card statement for my BOA Visa is due either the 5th or 6th of August and unfortunately for me, I had too much expenses this month. I’ve never paid minimum payment in fear of interests but now I think I may have to if I can’t do transfer my balance right away. I have never done a balance transfer before and was wondering if they’re usually pretty quick. If I am successful in completing a balance transfer before my Visa payment deadline in Aug, does that means my Visa is essentially paid off by Citi card (and I do not have to make any August payments to Visa?)? I read somewhere that Citi card gives you a check or put money in your bank account to pay off balance transfers…would the money I owe to Citi due to the BT be seen as a cash advance or just a regular purchase on my Citi statement? Sorry for the naive questions…I usually pay on time and in full so I never had to fuss with the other rules and terms…the reason why I applied for the Citi card was so I could hopefully pay off my BT with zero interest by just paying minimum payment (but of course I will try to pay more than that each time
Thank you for your anticipated reply!
Be careful that some cards charge 3% to have your balance transferred over up front. So it’s best for you to pay off your Visa balance while racking up your balance on your new card.
To make sure, you can always check your online account to make sure that you have $0 balance due on your visa before you cut it up and forget about it.
Ok, so I read your blog and have been researching 0% on BT cards. I currently have a fairly low interest rate (I think) at 10.25% with AMEX. All the BT cards I have seen have an 11.99-18% rate after the initial 0% period is over. I currently have over $10K on this card (don’t ask, I know, I am ashamed), so there is no way I can pay it off in the 0% time frame. Is it beneficial in the long run to take advantage of that time period with no interest on one of these cards and then have the new rate be more than what it is now, or to just keep it the way it is with AMEX, with my lower rate?
It’s important to figure out (even approximately) how long it will take you to pay it off. Obviously, the longer it takes you to pay it off, the more it swings back to the favor of the long term rate.
Saving the interest with the 0% balance transfer credit cards during the introductory period is HUGE savings, so are you going to use it towards the principles (ie, pay down more of the debt) during that time? If, by the end of the introductory period, that you have much less amount owed as opposed to having just your AMEX, then your interest may be less even with a higher percentage.
At the end, whether 0% balance transfers will work for you or not really depends on how committed you are, so it’s hard to say with certainty. You can run some scenarios and see which route is best, but the key of course is to pay it down no matter which route you take.
I just received my Citi platinum credit card, as featured in this article, this week. The 0% interest rate only lasts for 6 months and it is true that if you miss a payment on any card you have, the deal is revoked. I am land wealthy but currently cash challenged due to the recent changes in economy. I have a credit score of 800 (out of 840). I have never welched on a debt. Citi Platinum gave me a laughable credit limit of $3000, with only $900 available for balance transfers. There is a 3% surcharge to make the transfer.
Also, Buyer Beware! Find out if your balance transfer is considered a cash advance or purchase. Currently, Citi Cards do not allow you to pay off your higher % interest part of your cash account separately or as a first choice. I recently, on a different Citi Card than discussed above, paid $4000 off my balance with instructions to apply it to my cash balance. The answer was no; they get to choose. $3500 went to purchases/interest and $500 went to cash advance/interest. Therefore after interest, only $130 went to paying down the cash balance; whereas $3200 went to pay down the puchases balance. I had been paying 15% interest for both cash advances and purchases just a few months ago. They raised the rates to 20% (purchases) and 30% (cash advances) two months ago. They have agreed to bring interest down to 15% and 22% for 6 months. Then I have to renegotiate again. I had to go through 3 levels of hierarchy before I reached a person who had the authority to change my rates. Needless to say, I’m not happy with how Citi, nor other companies, are doing business. I have had this second card for 20 years. So much for valuing me as a client.
I am advocating that you use one card for any cash advances and a different one for purchases. Then you can pay down the most expensive rate, the quickest. I am starting the following protocols for myself. (1) I am paying an amount on my cards for all new monthly charges, plus accumulated interest, plus extra to pay down. (2) I’m paying for new purchases by check, whenever possible so that credit card companies do not receive the 2-5% fee they charge the vendor. This also helps the vendor and the economy for retailers. (3) I’m using a card with lower to 0% interest with complete payoff each month, if it is inconvenient or impossible to pay by check. Help me make this a grass roots movement; pay by check or cash, whenever you can!
I got the Citi Platinum, as well, and only have a few hundred left on the card before it is totally paid off and all of our consumer debt is paid off! What an amazing feeling that will be to be done with it. We have been playing the 0% balance transfer game for a while and it leads to some serious savings if you know how to do it right. Reading the fine print and choosing the right one is your only insurance for not getting slammed with fees.
Jerry
It’s always great to hear success stories like yours. I think the key is to be responsible and it sounds like you’ve been able to do it.
Congratulations on becoming debt free soon and I look forward to hearing from you again the day that you have everything paid off!
Choosing the right 0% balance transfer credit card is definitely the way to go. I signed up for one of those American Express cards and they charged me so much just to do the transfer that it didn’t make sense to make the transfer in the first place. It was such a scam but luckily, after much complaining to their customer service rep I might add, they reverse the charges.
I’m quite impressed that you were able to get any company, let alone a credit card company to reverse any charges. Whenever I call in, they always say no even if I get up to the manager level.
With these 0% balance credit cards, all I can say is to apply and then see what happens. Not everyone will let you join but if you find a good one, you are pretty much earning free interests.
When using 0% balance transfer credit cards, it’s crucial to make sure that you are keeping track of all the dates and interest rates as well as fine print. If there are no fees, then document it that way. If it’s 0% purchase, then write that down as well.
Otherwise, it’s too easy to lose track and all the benefit will be gone before you know it because credit card companies will pounce on the chance to make their money back.
Nice blog. I have been playing the 0% interest transfer game for 4 or more years. As I figure it, 3% for a transfer is better than 7-15% on a card. It has helped me get my CC debt down such that I think I am near the end of the transfer game. I was hoping the last one would be enough, but I lost my job last year and could not be aggressive on the payoffs. Now I am debating whether to eat the 7.99% interest on the balance and just try and aggressively pay it off in the next 3 months or go for a Discover 6 month 0% (3% fee) hold over to get it done.
Correct me if I am wrong, but a 7.99% APR translates into ~0.665% monthly. Keeping the math simple, it would take 4.5 months to recover the 3% paid. If I plan to pay it off in the next 3 months, then I am better off keeping the 0%->7.99% and gettin’ er done
Say $7K in debt – $210 in 3% fee or $46 in interest the first month the 0% turns to 7.99%.
Bottom line, if you CAN pay off your card in less than 4 months, the 0% transfer does not pay. If it will take longer, go for it, but it appears the days of 12 month at 0% are gone for now (which I took advantage of for 4 years
Dave
I have a Discover Card I have had since 1994. I did some cash advances ( I know…very stupid) but the interest rate is high on that card. Can I do a 0% transfer to another Discover Card?????? Or do you need to use a different company?
You can do a balance transfer to/from any card regardless of company. However, you must move it to a new card that still has that introductory 0% promotion. Alternatively, you may want to see if moving it to a lower interest rate card may make sense (please do the math to make sure if you go this route).
How do I figure out if paying the 3% transfer is better for me or not? Is there a formula to find my break even point between the interest charges and balance transfer fees on a 0% card?
The exact calculation will depend on the credit card company, but a calculation that is close will be something like this.
Take your current card’s interest rate (it could be 23.99% or 18.65%), then divide it by 365 to get the daily interest rate.
Now, take your credit card debt, The interest rate charges per day is your debt x the daily interest rate. We will call this X.
Now, take your credit card debt and multiple that by 3% to get a number. We will call this Y.
Divide Y by X, and you will get roughly the number of days that it takes for your interest rate to make up the 3%. If the days is less than the introductory 0% period, you will come out ahead.
Otherwise, it doesn’t make sense.
Hi Ning. I have had my Visa since 1998. It has been bought out by several companies, but recently by CHASE. In 11 years I have never been late or missed a payment and had the card payed off at one point. My balance is currently high, ($15,000) due to divorce, single mom and kid in college but again I have always paid on time and more than the minimum. They have recently raised my interest rate AGAIN. I satrted with 6% and when Chase bought it, they took it from 8% to 10.99% and now it’s at 12.99%.I have called and complained and the response was I didn’t have to pay the higher interest rates if I closed my account.My credit union has offered me a gold card at 9.99% with no fees and I can only get that rate because my credit score is above 700. Is this wise to transfer that $15,000 and just pay the 9.99% to pay it off? Thanks!
You almost need a crystal ball to see into the future whether it will make sense or not. Obviously, 9.99% is lower than 12.99% so it’s a good move. However, will they increase their rates like CHASE? Also, you mentioned no fees. Do you mean that there’s no fees to have your balance transferred over? No annual fees isn’t the same as no fees for balance transfers so be careful with that and make sure you find out before you are hit with a 3% fee or something.
In general, credit unions seem to be better with terms than those big commercial banks BUT (and it’s a big but), you just never know what will happen in the future. Probability theory will tell you to switch to a lower interest rate if there’s no fees whatsoever (and everything else being the same) because you are just as luckily to see rate increases from either company but individual cases may not work out.
I just opened a Chase card with 0% APR, 8,000 dollar limit for the first 6 months and transferred $2700 balance from Nordstrom Visa (10,000 limit, 16% apr) over to the new card. I have another Wamu-now-Chase card that I’ve had for 4 years that has a much higher balance (4,000) and a high interest rate (23%). Unfortunately I can’t transfer the balance for 90 days because it’s now a Chase card. The Nordies card was my first, but I’ve had them both since I was about 19 (now 23).
I also applied for a card at Bank of America that’s 0% APR for 15 months, 3% transfer fee. I was approved but only for $2800, the guy said I could call when the card came and that I would be able to increase the limit.
My questions:
1.They say shouldn’t close your oldest card? I have excellent credit but am wondering if even a four year old card is considered “old” in this situation? Can I close this old card once the balance is zero? How bad will the ding be for closing it down the road?
2. Is opening two new cards in a couple of weeks bad for my credit? Will (potentially) having 4 cards open look bad on the FICO?
3. Finally, if I am able to get the BofA card to up my limit, should I transfer both balances or just the WaMu? Is it better for things to be spread out a bit?
I’m open to any input here! Basically I don’t want to hurt my good credit score but I need to pay off this stuff!
THANKS!
1. Four years is not considered old, but scores are calculated based on average account open duration. Anytime you take an “old” card out of the equation means a smaller average years opened. Therefore, it’s wise to keep it open unless there is an annual fee.
Since it’s a formula that affects other cards you have as well, it is also impossible to say exactly how “not having” the card will affect your credit score. However, I would strongly suggest you keep your card opened so you don’t need to find out!
2. Opening two cards may temporary affect your score but since you already applied and got them approved, I wouldn’t worry about something that already happened.
Having 4 cards opened isn’t bad for your score. In fact, the more cards you have, the better it generally is because your utilization rate will be lower (you have more credit limit, but same use) and if all your cards show “on-time” payment, it proofs that you are able to juggle credit and make payments.
3. It is better to have your balances spread out. In fact, I would try to keep the utilization rate of each card to be under 30% if your score is the priority. However, since paying less interest is what we are after, moving just the WaMu to your BofA card and trying to pay both of them off as quickly as possible is the way to go.
Good luck with your plan. I sincerely hope that you will pay off all your credit card debt and enjoy freedom soon!
Matt thanks for the post, I just contacted Bank of America and applied. What I really liked is after 2 hours of research on balance transfers a live chat person came on as soon as I logged into their webpage. Instead of digging through a bunch of cards and click /points they efficiently looked up a card that suited my needs. If I get the approval timely I am going to be very happy with this. Thanks for your blog it really helped narrow down a huge decison!
Barclays which offers a similar offer on several different kinds of cards appears to be doing a a 0% balance transfer now for 6 months with a 3% transfer fee, but with a $50 maximum. This means that if you transfer any more than $1,667, your transfer fee caps out at $50. So for example if you transfer $10,000, a 3% fee with no max would cost $300, but with this deal, you save yourself $250.
I haven’t been able to find an application for this card online, did you already obtain one? What is the contact info? They seem to have a website and phone,one for existing cardholders only. I would like to take advantage of this 3% cap, I had that option before with Bank of America last year but no longer.
This is interesting for those who are always looking for the latest 0% balance transfer credit cards:
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With a host of new legislatively mandated protections for credit card holders under the Credit Card Act of 2009 set for February 2010, the banking industry is already curbing “zero percent interest” introductory rates, and, in some cases, hiking one-time balance transfer fees.
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Actually, what I found is that many cards are starting the balance transfer percentage as 3, 4 and even 5% as the introductory period, and at the very least, the duration of the 0% balance transfer is coming down.
Also, as indicated earlier, there’s a big difference between balance transfers and purchases, as some cards have 0% balance transfers while others have 0% for future purchases so make sure you are well aware of it before applying.
Anyone have any luck with these 0% balance transfer credit cards? I keep looking and am afraid that a trial and error method will just ruin my credit score. Anyone have any experience with a particular card that will be good if I want to off load all my balances onto it? My current card’s intro period is about to expire in 2 months and I desperately need to figure out a way to get everything transferred over before I get dinged for more interest. Any help is greatly appreciated!
Your blog is very interested, however misleading. There is no win for 0% balance transfer card without some sort of cap on transfer fee. Is there a credit card out there with a cap on transfer fees? or BETTER yet, is there a card with 0% balance transfer APR for 6 months or a year with a 0% balance transfer fee? answer me this money ning.
You are correct that it doesn’t make sense to apply for a 0% balance transfer credit card without a cap on transfer fee. Lately, many credit card companies are reducing the introductory APR period and/or increase the transfer fee, but it doesn’t mean that it will stay that way.
I haven’t verified but reader Josh made a comment a few days ago that Barclays has a 0% balance transfer credit card that caps the transfer fee at $50. You may want to research on that if you’d like.
No one person has any control of how credit card companies will change their terms, but it doesn’t mean that the idea isn’t sound. Even if there are no cards that have a cap on transfer fees, it doesn’t mean that there won’t be one tomorrow that will spring up tomorrow.
This article fails to mention that almost all of these cards charge a substantial fee for balance transfers. The best are capped at $50, or $75, but most are 3% or 5% of the amount transferred. BE CAREFUL!!
I am with you in that I have never really been a big fan of credit card arbitrage plays although it certainly makes sense. Now paying off debt that far ahead of schedule is quite impressive though!