Debt plagues millions of Americans each year, and it can be hard to make a dent in your debt, especially if you’re already living paycheck to paycheck. One solution to pay off debt quicker is to use a 0% APR transfer credit card for a promotional period.
I know what you are thinking. Credit cards are probably the reason that you are in debt in the first place. It’s true that you will need to address your budget and spending issues before using this debt repayment tip. If you cannot use a credit card wisely, then think twice before using one to help your debt repayment.
If you are serious about repaying your debt though, then these are the best cards to help you do so:
Chase Slate®
The Chase Slate® offers an impressive $0 balance transfer and 0% introductory APR for the first 15 months. This card does not come with a reward system or bonus cashback, so only use it for paying off debt. You must transfer your balance over within 60 days of opening your account to ensure you get your introductory 0% APR and get a free balance transfer.
One great thing about the Chase Slate® is that interest is not deferred. However, you will pay late payments, so be sure to stay on top of your payments.
Sphere® Credit Card
The Sphere® Credit Card offers the longest 0% APR promotion right now. You can secure 24 months of 0% APR for balance transfers. Purchases will receive 0% APR for the first 12 months of the account. There is, however, a balance transfer fee. At 4%, this fee can be a bit scary, especially when you are trying to reduce your debt, not increase it.
For example, if you had $10,000 of credit card debt you wanted to tackle, it would cost $400 to transfer the balance. However, if your current APR was 18%, you would be paying $1,800 each year. The best approach would be to transfer this debt and pay about $434 each month. By the end of two years, you would have eliminated that $10,000 debt and the $400 fee without paying any extra APR.
Keep in mind that this card does still have penalty APR d late fee for any late payments. The penalty APR is 29.99% for six months- ouch!
Citi Simplicity Card
There is a lot to love about the Citi Simplicity card. First off, no penalty APRs or late fees ever. Secondly, opening a new account gives you 0% APR for 21 months on balance transfers and purchases. There is a 3% balance transfer fee.
Balance Transfers and Credit Scores
Applying for a balance transfer can affect your credit score, since it is a hard inquiry on your credit. Your score could drop about five points, but it will quickly bounce back up with regular on-time payments.
In some cases, your credit score could improve because your debt utilization is improving. Even though you haven’t paid off any of your debt yet, your new line of credit shows that you have a bigger gap between your credit line and what you owe.
You will most likely not qualify for these cards if your credit score is not very good or excellent, so it might be a good idea to boost your credit score above 650 before applying.
How do you plan to tackle debt? Do you use these credit cards?
{ read the comments below or add one }
I’ve used this approach to pay down debt. I’ve used Citi Simplicity and Chase Slate, as well as others. Chase actually sent me checks to make a balance transfer… I wrote myself a check and deposited it, and then payed it off over the course of 12 months. I regularly receive balance transfer offers from existing cards, so you don’t have to be a new customer to qualify.
I’ve used balance transfers primarily to pay for large purchases over time. I buy something with one card, claim the rewards, and then transfer the balance to another card and pay it of in 6-24 months (whatever the term is). By claiming rewards on the purchase, my finance charge can be as little as 2% of the purchase price, which is downright cheap. Of course saving money for the purchase in advance would be the better option, but if you have a large, unexpected expense come up and you don’t want to dip into an emergency fund (or recently tapped your emergency fund for something else), this is a good option.
If you use this approach to pay off existing, high interest debt, you have to make sure you have the money in your monthly budget to pay off the debt by the time the term ends. If you don’t, then you are simply rearranging the deck chairs on the Titanic, or at the very best kicking the can down the road.
Good point about having the money to pay the whole thing off before the term ends.
And I didn’t know that using those checks to effectively get a balance transfer qualifies for those reward points. Making a purchase for a 2% interest cost for 18 or 21 months is definitely a great deal.
So, I don’t use the balance transfer checks to actually make the purchases. What I do is to make a purchase using a rewards card, and then either transfer the balance or use a balance transfer check to get cash and pay the rewards card. I don’t do this often, but I do recognize that the flexibility can be really helpful.
Ahh gotcha. Nice move.
Nice write up Ashley. I had a friend use the promotional rates to transfer his cc balances and it seemed to work well for him. I’ve also heard horror stories though too. I think if you’re going to use this approach to pay off cards, you’ve really got to be calculated. But it can absolutely be a great way to save on interest!
You definitely need to be on top of things when you are “playing the credit card balance transfer game”.
These cards could be a big win, but you can get burn too if you aren’t careful.