Instead of paying interest on revolving credit, why
not get a balance-transfer card? This is a card that almost everyone
can get that charges 0% interest for twelve to fifteen months on balance transfers
from other cards; after this time, the regular interest rate (or "APR") applies. Here's
our best consumer-friendly advice how to do it:
Savor the savings. A typical balance transfer card will
charge you zero percent interest for one year. As an example, if you transfer
$6,000 from a card that currently charges 15% interest, you'll save $900
in just one year!
Lifetime low-interest transfers.
Some cards (such as Blue
Cash® from American Express®)
charge a low interest rate around 5% on transferred balances for the entire
life of the balance, instead of just one year -- a better deal if
you foresee paying off the card slowly. The zero-percent
cards work better if you plan to pay off the balance soon.
You can also acquire new zero-percent card when the introductory
low rate runs out.
Get a card that matches your credit. As a rule of thumb,
a good credit record is needed to get a balance-transfer card with an APR
less than 10% to 11%; an average credit record will get you a card
with an average APR (usually around 12% to 15%.) If you have credit problems, it won't
be easy to find a balance transfer card.
A balance transfer fee may apply. This is usually 3% of the
amount transferred, but is often capped at $50 or $75. Look for it
in the card application's terms and conditions.
You can transfer only so much. Only a portion may be allowed
to be transferred, often $5,000 to $7,000. But this is still a productive
step in the right direction that can save hundreds or sometimes thousands. And in
six months you could get another balance transfer card without harm to
your credit record. Also, the special rate for balance transfers sometimes
only applies if you initiate a transfer when applying for the card.
Be on time with payments. In order to keep your 0% balance transfer rate, you are required to make the minimum payment on time. It's wise to pay at least 10
days in advance.
The rate will rise later. After a six to fifteen
month introductory period, the rate will rise to a new rate somewhere between
8% and 20% depending on the card.
Talk your way to a better rate? If you can't obtain a balance-transfer card, Talk Your Way Out Of Credit Card Debt tells how to
call credit card companies and ask for a rate reduction.
Other low-rate loan sources? Debtors should also think about paying off debts at low interest by
borrowing from home equity, kindly relatives,
your 401(k) plan, or your life insurance policy.
The Best Balance-Transfer Cards
The longest 0% introductory period is fifteen months, from the Advanta
Platinum with Rewards. After that time the APR is still very low,
currently 7.99%. Don't let the fact that it's a small business
credit card deter you, because you can still apply as a "sole proprietor"
with no problem.
Many other cards allow a 0% rate on balance transfers for six to twelve months.
A good choice is the Discover More card, with a 0% rate for twelve months on
both purchases and balance transfers. You'll also get up to 5% cash
back on purchases in popular categories that change four times a
year like Home, Apparel and more. This card comes in many designs
("Sealife Collection" version, "Clear" version etc.) but the cards are all
pretty similar.
