What Is The Expiration Date Of The Introductory Period?

Find out whether or not the introductory rate ends during a billing cycle.  If the rate ends within a billing cycle, you will need to actually pay off the credit card balance in the preceding month to avoid interest rate charges.  Look for the introductory rate expiration date in the credit card agreement or call the credit card company and ask.

What Is the Balance Transfer Fee?

With the recent changes in the credit card industry, balance transfers have begun to vary widely from the (once standard) 3.0%.

In fact some 0 balance transfer credit cards carry a 4-5% balance transfer fee.  This raises the “effective” interest rate considerably particularly if the fees are not capped at $50 to $75 as was once standard in the industry.

If you make multiple balance transfers, those fees can substantially undercut any savings that you realize from the 0% interest rate balance transfer.

What Is The APR On Convenience Check Balance Transfers?

While convenience checks can be a great way to access your 0% interest credit line, the terms for using them are often different from balance transfers by phone.  It is imperative that you carefully study the fine print on your 0 balance transfer offer.

Often, convenience checks are treated as cash advances and the 0% APR introductory rate may not apply.  Even if the rate does apply, the balance may be subject to a the (often very high) interest rate for cash advances after the introductory rate ends.

So, if this is the case, it is very important to be able to pay the entire balance by the end of the introductory period.

What Causes The 0 Balance Transfer Rate To End?

To win the 0 balance transfer credit card game, you must impeccable financial discipline.  If you make a mistake and default on any of the terms of the credit card agreement, it will usually trigger a large rate hike.  I have seen credit card agreements that punish a late payment with an penalty interest rate of 28%

Here are some of the common reasons that will trigger a default rate hike:

1. Failing to pay the minimum payment by the due date and time
2. Exceeding the credit limit on the account
3. Failing to have a check with your payment honored by your bank
4. Failing to make payments to another creditor on time, if the record of this shows up on your credit report.

How Does The Credit Card Company Apply My Payments?

Oftentimes, a consumer will accept a 0 balance transfer offer and consolidate their credit card debt onto the card.  Only later, does the consumer find out that the terms of the credit card agreement are such that all payments are applied to the 0% APR balance first.  The consumer is left saddled with a high interest balance at the end of the introductory period.

So is you take advantage of a 0% interest balance transfer, pay off any other outstanding balances on the card before making balance transfers.  Then use another credit card for new purchases.  Otherwise, be prepared to address a residual balance accumulating credit card interest at rates as high as 19.99%

Read The Fine Print In Order To Leverage A 0 Balance Transfer Credit Card

Take note of the introductory period and the balance transfer fees before you initiate the balance transfer.  Consider the implications of using convenience checks.  But most of all exercise the financial discipline to avoid triggering a ridiculously high default rate.

In short, exercise good judgment and sound financial discipline and you can leverage the power of a 0 balance transfer credit card.

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Do I Need A Credit Card Debt Consolidation Loan?

One of the main ways to begin get out of debt is to consolidate credit card debt in to a lower interest debt consolidation loan.  In order to determine whether or credit card debt consolidation would be right for you, consider these factors:

• Do you have multiple cards with long term outstanding balances?
• Do you frequently make the minimum payment on your cards?
• Is your credit debt increasing over time?
• Are you at or close to the limit on one, or more of your credit card accounts?

If any of these factors apply to your situation, you should consider a credit card debt consolidation loan.

How Do I Consolidate Credit Card Debt?

Consolidating credit card debt involves combining all of your outstanding credit card balances into one, lower interest loan.  Regardless of the type of credit card consolidation loan you use, your goal should be to lower your interest rate and monthly payment on the consolidated credit card loan balance.

The key to making a debt consolidation strategy work for you is to exercise the discipline to use the savings from the lower interest rate and monthly payment to pay more on the loan principal each month.  It also means looking for ways to decrease your other monthly expenses even where you are paying less to service your unsecured personal loan.  It is imperative that you live on a cash basis while repaying your credit debt  and avoid spending more money than you have.

Debt Consolidation Options For Those With Good Credit Scores

The best options for debt consolidation are available to those with excellent credit scores.  It is, therefore, imperative that, at the first sign of financial difficulty that you take steps to consolidate debt.  You cannot afford to wait until you have bad credit.

Here are some of the main options for consolidating your credit card debt:

• Transfer credit card balances to a lower interest credit card. These interest rates can run as low as 7.50% if you have very good credit.

• Use balance transfer checks to consolidate credit card balances. Even now, credit card issuers still mail out balance transfer checks offering a low interest rate for the life of the balance (some as low as 3.9 to 4.9 APR).  You will have to pay a balance transfer fee in the amount of 3-4%.  Even with the balance transfer fee, it still represents an excellent opportunity to consolidate credit card debt.

• Open a home equity line of credit (HELOC). If you own your home, you can take advantage of your home’s equity as a source of low interest lending.  Although it is not wise to make a habit of taking equity from an appreciating asset to pay for consumptive spending, you may have no choice but to do so.

• Negotiate with your credit card company. It is possible to use the current economic climate as leverage to negotiate balance transfers into one of your lower interest rate credit cards.

These credit card strategies are only available to consumers with good credit scores.  Consumers with bad debts or poor credit scores will have to explore other means to achieve their debt consolidation goals.  Even if you have bad credit, it makes no sense to procrastinate and do nothing.  As your credit debt begins to spiral out of control your efforts to consolidate your credit cards becomes more difficult.

What About A Non-Profit Debt Consolidation/Credit Counseling Company?

A good nonprofit credit counseling company can put together a debt consolidation program and can negotiate credit card debt relief plans for you.

To find a nonprofit credit counseling service, contact the National Foundation For Credit Counseling to find a list of reputable credit counseling and debt consolidation organizations available to you.  A good non-profit credit counseling company will often be able to get people out of debt easier than going it alone.

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While 0% APR credit card offers are getting harder to find, they can be a great way to consolidate debt and eliminate your outstanding balances – if used properly.  Here’s how….

Use 0% Credit Cards To Pay Off Existing Debt

Traditionally, there were two ways to consolidate your credit debt.  The first way was to get a debt consolidation loan.  The second way was to get a home equity line of credit (HELOC).

Honestly, most people never considered using a series of 0 APR credit cards to pay off the credit card debt with little interest.  In some instances, this may be the best option. If your credit is in good shape, a 0% credit card will allow you to payoff your credit card debt even quicker than a consolidation or home equity loan.  If you can secure a 0 interest credit card, you will be able to spend virtually all of your monthly payment eliminating principal instead of paying interest.

How To Use A 0% APR Credit Card To Eliminate Credit Card Debt

The process for using a 0 interest credit card to eliminate credit card debt is really straightforward.  Follow these steps:

1. Transfer your existing credit card balances to a 0% credit card.
2. Continue to pay down your balance as usual. But instead of paying just the minimum each month, add the amount of interest you saved and pay it as well.
3. Keep a careful eye on the introductory period.  One month before it expires, begin to shop around for a new interest free credit card offer and transfer your balance again.
4. Continue this cycle until you’re debt free.

Author’s Note: Be aware of these two traps when using this procedure.  First, with the recent changes in the credit card industry, you will find that you will incur a 3-4% balance transfer fee.  Second, transferring credit card balance repeatedly can slightly impact on your short term credit score.  But, in my opinion, this impact is greatly outweighed by the savings in interest.

0% APR Credit Cards vs. Debt Consolidation:

Still thinking about a credit card debt consolidation loan instead of a 0% credit card?

Well, let me wow and amaze you.

Let’s examine the details to see how much you can save, and how much quicker you can pay off your debt using the method shown above:

Assume you have an existing credit card debt of $15,000. You’d like to pay $250 per month until the debt is paid off. Your debt consolidation loan was approved at 7% which is quite a bit lower than that 16% APR credit card.  Congratulations on negotiating such a great deal!!  Let’s see how that works for you:

• Beginning Balance:        $15,000
• Total Amount Paid:        $18,516
• Total Payments Made:            75

Now let’s compare paying off this same debt using 0% APR credit cards.

• Beginning Balance:         $15,000
• Total Amount Paid:         $15,000
• Total Payments Made:            60

Your savings are $3,516 over sixty (60) months.  You will be debt free 15 months before your debt consolidation loan is paid off.

Using The 0% Credit Card Method:  Caveats And Cautions:

It is clear that consolidating credit card debt with a 0% APR credit card can be a real solid financial move.  However, you need to observe these cautions and precautions when using this strategy:

1. Do not switch credit cards more than necessary as it can negatively impact your credit report.
2. Search for the 0 interest credit cards that have the longest 0 APR periods
3. Check the APR on balances after the introductory period to make sure you aren’t hurt in the event you cannot continue to transfer the balances.
4. Do not continue to use the card after you pay it off.  But, do not close the account either.  Closing the account can adversely impact your credit score.  Just cut the card up and forget that it existed.
5. Do not overspend with your new credit card either even if you can make purchases at 0% APR.
6. Be sure to apply the money you save in interest (all of it!!!) to the payment as extra principal.  You will eliminate your debt much faster.

If you observe these tips and shop carefully, you may find that a 0% credit card strategy is a useful and lucrative alternative to consolidating your credit card debts with a traditional debt consolidation loan or home equity line of credit.

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