Transferring high interest credit card debt to a 0% card is appealing. The savings in interest can be substantial and it accelerates getting out of debt. Its nice when the entire credit card payment goes to principal, not interest.
Transferring balances to a 0% card is not rocket science. There are, however, some traps to avoid. Further, not all balance transfer cards are created equal. Some are notably better than others. To get the most out of a balance transfer credit card this season, here are 7 tips to keep in mind.
1. Type of Debt: Its most common to transfer high interest credit card debt to a 0% balance transfer offer. In some cases, however, some want to transfer other types of debt, including school loans, car loans, and medical debt. Not all credit cards, however, allow consumers to transfer non-credit card debt. You can find a breakdown of what type of debt can be transferred for the major card issuers in this guide to balance transfer credit cards.
2. Length of 0% Offer: The longest 0% balance transfer offered today is from Citibank and it lasts for 21 months. After that, the rate on any remaining debt is subject to Citis regular APR. The offer can be found on the Citi Simplicity card. So if youve been looking for a longer 0% offer, you can stop. They dont exist.
3. Balance Transfer Fee: With one exception, every balance transfer card charges a transfer fee. The fee is typically a percentage of the amount transferred. The most common fee is 3%, which results in a $30 fee for every $1,000 transferred. The one exception is the Chase Slate card. For transfers initiated within the first 60 days there is no transfer fee. The 0% introductory APR lasts for 15 months.
4. 0% on Purchases: Dont confuse balance transfers with offers of 0% APR on purchases. Many cards offer both. With 0% on purchases, the card issuer waives interest charges on revolving balances from purchases for a set period of time, often the same length as the balance transfer offer (but not always). If you need to transfer a balance, make sure the 0% offer applies to balance transfers.
5. Credit Score: Most of the top 0% offers require good to excellent credit. As a rule of thumb, a FICO score of at least 700 or higher should be expected, although many factors go into underwriting and lower scores have been approved.
6. Regular APR: Even the longest balance transfer offers eventually expire. When they do, any remaining balance will be subject to the cards regular APR. As a result, its important to plan now for how youll handle this debt when the 0% interest is gone.
7. Think Beyond 0%: While paying no interest for an extended period of time is an attractive offer, many balance transfer cards offer significant benefits. For example, the Chase Freedom card offers a $150 bonus if you spend $500 on the card in the first three months. It also offers cash back of up to 5% and comes with no annual fee. Those benefits are in addition to a 0% APR introductory rate on balance transfers and purchases for 15 months.
No interest credit cards can be an excellent tool to help get out of debt. The key is to avoid any new debt after transferring existing balances to no interest cards. Once transferred, work hard to pay off the card by the time the 0% introductory rate expires. Alternatively, you could transfer the debt again to a new balance transfer card until the debt is paid, a strategy I deployed years ago to pay off my credit card debt.
If you ended up going over-budget this holiday season, you're not alone. But if you ended up in credit card debt, you need a game plan.
Decatur has Georgia's lowest average credit card debt, according to a new ranking by CardHub.
The city's average debt is $5,526 with 22 payoff months, according to CardHub's report. Decatur is the only city in Georgia to make the top 25, reports the AJC.
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Travel. Cash back. Balance Transfer. Airline. Small Business. With the amount of credit card marketing in America today, these phrases are becoming more and more widely recognized. According to one CFPB study, banks spend over $3B on credit advertising each year.
Even though many of you may have come across this nomenclature before, some may not know exactly what each of these different credit card types does or how they differ. How are travel cards different from airline ones? Balance transfer from zero percent cards? This article will give you a crash course in each, making you one step closer to becoming a credit card expert.
- Rewards: Generic Travel, Airline, Hotel, and Cash back. Rewards cards is an umbrella term that encompasses all credit cards that earn their users some form of prizes. Travel, airline, hotel, and cash back are the 4 major categories falling into the scope of these. Airline and hotel cards are ones co-branded with a particular company. The rewards these cards offer tend to be mainly redeemable for more nights or flights, with the affiliated company.
Generic travel cards, on the other hand, offer users greater flexibility, at the cost of rewards. These cards will generally provide consumers a lesser value per dollar, and in turn give them more travel and redemption options. Cash back credit cards are aimed at more general consumer spending - gas stations, grocery stores, etc. The rewards these cards provide are also a lot more flexible. Instead of being miles or points that you use to pay for additional travel, cash back credit cards provide users with statement credit - that is money that can be used to offset charges on their credit card bill.
- Debt Management: Zero Percent cards, Balance Transfer, Low Interest. These types of cards fall into what I call the debt management group of credit cards. Their aim is to help individuals who are dealing (or are about to deal with) credit card debt, by mitigating the negative effects of interest. Low interest cards are the most self-explanatory. They are simply cards that provide low long-term APR to account holders. Zero percent cards (sometimes referred to as 0% APR) are pretty straightforward in what they do. These cards will provide users with no interest on purchases for some set amount of time - usually anywhere between 6 and 12 months.
Balance transfer credit cards do the same, except on any credit card debt that is transferred from another card to it. Typically, there is a small fee associated with such a transaction. However, this added charge usually pales in comparison to the interest savings these cards can produce.
- Small Business Credit Cards. These cards can fall into any of the other groups we mentioned above. A major point differentiating these from other cards, however, is the fact that they are issued to companies, instead of individuals. While this may seem obvious at first, the distinction is critical. Because small business credit cards can be issued to a company, instead of a consumer, a business owner doesnt need to jeopardize his or her personal credit score in the process. While small business credit cards still require a personal guarantor, any late payments or issues will typically only reflect on the company, and not any one individual within it.
Account holders, on some of these business cards, also have the ability to export spending into different file formats, or products such as Quicken. This can greatly streamline accounting and expenditure management for a company, which is especially important around tax time.
- Secured credit cards. The last major group of credit cards worth highlighting is secured cards. These are targeted at individuals with subprime FICO scores (<600). If you have filed for bankruptcy in the past, or were delinquent on a payment, you may be in this group. Secured credit cards require users to submit a security deposit, in order to open an account (hence the name). Cardholders are then issued a credit card with a limit equal to their deposit. These cards can then be used to slowly build up ones credit score.Generally, secured credit cards come with high APR and little to no rewards. They are not intended to be anyones long-term credit card, and instead are just a temporary solution to a credit score problem.
- Cash Back, Miles, or Points: Understanding the Different Credit Card Rewards
- Credit Scores: What are they? How do they work?
- What Are Credit Card Balance Transfers?