Wednesday, September 12, 2012

Free Money...For A Limited Time Only

I know I've covered how to use credit cards to make money in the form of cash rewards. Now I'd like to cover how to use credit cards to assist in eliminating credit card debt. Fighting fire with fire, if you will.

The way to do this is with a balance transfer credit card, essentially just a new credit card account to which all existing balances could be transferred. One immediate gain is getting all your debt in to one easily managed place, assuming it fits within the credit limit of that new card. Lately, there have been some even greater benefits to these balance transfer cards like 0% APR for a promotional period and no balance transfer fees.

The Chase Slate is one such card. Right now there is no balance transfer fee for any transfers made within the first 60 days and 0% APR for the first 15 billing cycles which works out to be Novemberish 2013. Meaning you could consolidate your debt into one card and owe no interest for a little over a year. Giving you lots of time to combine the interest savings with other savings to pay off the balance transfer card before the promotional period ends.

Which makes you wonder, why do so many people still have credit card debt at such high interest rates? Well, turns out it's not all ponies and sunshine. To qualify for a balance transfer credit card you need to have a decent credit rating. According to Credit Karma, the average approved credit rating for the Chase Slate is 714 with the lowest approved rating at 674. Also, you have to be careful not to miss a payment. With most balance transfer cards, once you miss a payment you can kiss the 0% APR goodbye. Last, but not least, you should be sure you can pay off the balance by the end of the promotional period. If not, odds are you'll be paying a much higher APR than what you currently have.

Having said all that, I think that a 0% APR with no balance transfer fee is a great way to start getting out of credit card debt. I would transfer whatever debt possible and not put any additional purchases on the card. Then start saving at whatever rate is required to pay off that card by the end of the promotional period. If that means Ramen and no cable, then you eat Ramen and stare at the wall. Easy for me to say. In the end, once you are done with credit card debt, it will all have been worth it.

What has your experience been with balance transfer credit cards?

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