Beverly Harzog is a nationally recognized credit card expert, author, and consumer advocate. She blogs about credit cards at BeverlyHarzog.com.
Being in debt is the pits. I've been there, and believe me, I'll never forget how awful it is to be in that situation.
But I know that as soon as I started taking steps to tackle my debt, I started feeling better. One way to chip away at -- or even pay off -- your debt is to transfer your balance to athat's a 0% introductory .
Now, the details can vary a little by credit card pays off the balance on your old credit card. When the transfer process is complete, you start making payments on your balance to your new credit card ., but here's basically how a balance transfer works: After you request a balance transfer, your new
It sounds simple enough, right? But balance transfers can actually be tricky. So before you make the leap, let's go over a few things that you need to know to make your balance transfer a resounding success.
1. You Need an Excellent Credit Score to Qualify.
If you don't have a FICO score that's excellent -- say around 750-plus -- you may have trouble getting approved for the best offers. By the best offers, I credit cards with at least a 12-month, 0% introductory APR and a decent "go-to" rate. The go-to rate is the ongoing interest rate you'll get when the intro period ends.
However, a score below 750 doesn’tyou can't qualify for any offers. If your score is over 700, I still encourage you to investigate possibilities. There are plenty of cards that don't an intro rate but still might you a lower APR than the one you have right now.
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2. Your 0% Interest Rate is For a Limited Time.
You absolutely have to read the "terms and conditions" of your new card so you understand how long the introductory rate lasts. A year or so ago, I saw intro rates for as long as 24 months, but alas, they've come back to Earth.
Now, some cardsintro rates for up to 18 months, which is still pretty darn good. Remember that your goal is to pay off your balance during the interest-free period, if at all possible. So if you have an 18-month intro period, divide your balance by 18. That's your monthly payment -- no exceptions unless you have an absolute financial emergency.
3. You'll Probably Pay a Balance Transfer Fee.
Every now and then, a few cards boast 0% intro APRs with no transfer fees. But unless you get one of these deals, you can expect to pay a 3% to 4% fee on the amount transferred. So if you transfer $5,000, you'll pay around $150.
And, yes, this is an annoying fee. But keep in mind how much you're saving by not paying interest. Really, in many cases, it's worth paying the transfer fee to get out from under a high interest rate for a year or more.
4. You Might Have a Deadline on the Balance Transfer Offer.
Again, details like this are found in the fine print. I know it's boring, but you have to make yourself read all of the disclosure statements.
I've seen offers that require new cardholders to make the balance transfer within 30 days. But if you think about it, this shouldn't be a problem. If you've gone to the trouble to get approved for a balance transfer, you want to go ahead and do it as quickly as possible.
5. You Can't Immediately Stop Making Payments on Your Old Card.
It can take weeks for a balance transfer to complete. Keep making monthly payments to your olduntil you confirm that your balance is zero. You can do this by checking your account online, but I'd also the old and get verbal confirmation.
If the balance transfer hasn't been completed, you could miss that payment. This means you'll be hit with a late payment fee. And this can hurt your credit score if your late payment is reported to the credit bureaus.
6. Your New Purchases Might be Subject to a Higher Interest Rate.
This is a very important point for two reasons. First, in most cases, your new purchases are subject to the go-to rate. So if your go-to rate is a variable 13.99% APR, then those new shoes will accrue interest at that rate. You can avoid interest expense if you pay the amount spent before the due date on your statement, but that leads to my next important point.
You must resist the urge to put any new purchases on your card. Your goal with the new card is to pay off your debt. Stick with that goal and throw as much money as you can at your balance.
New shoes or a lobster dinner at a fancy restaurant can wait. Trust me, you'll feel much, much better when you get rid of that debt.
So before you reach for a 0 interest credit card, run the numbers and figure out how much your monthly payment has to be for you to pay off the transferred balance during the 0% intro period. Be sure you also include any transfer fee cost when you calculate your monthly payment.
To improve your chances of making the transfer a success, don't use the card for any new purchases. Focus on making your monthly payment and paying off the debt. Consider setting up an automatic payment, email or a text reminder so you make your payments on time.