Check out our 0% APR credit cards and our tips for saving money with balance transfers.
Here’s a money saving tip to look into: you can reduce your debt simply by moving your debt balance around — that is, if you have good enough credit to be able to apply for cheaper debt.
In particular, based on the terms and interest rates charged on your current loans and credit cards, a balance transfer might help you save significant cash. Paying off high interest credit cards and loans with a lower interest loan can add up to hundreds or even thousands of saved dollars. Following is a list of balance transfer credit cards we like:
0% Balance Transfer Credit Card Offers
How Balance Transfer Cards Can Save You Money
Here are the basics: a balance transfer involves moving funds from one loan account to another account. Instead of paying 25% interest on an outstanding credit card balance, why not move it somewhere else where you’ll pay much less interest? If you come across a credit card with a 0% intro rate for a period of time, you can take advantage of this opportunity to pay down your balance as quickly as possible. Or you may find that moving your balance to a lower interest card with no fee for balance transfers can also be a great move.
Other Ways To Do A Balance Transfer
There are actually a few ways that people save money via balance transfers. Here are a few popular approaches:
- Use a lower interest credit card to pay off high interest cards;
- Take out a personal consolidation loan to pay off all your outstanding credit cards so you are charged a lower interest rate with one simple monthly bill;
- Refinance your home (if you’re a homeowner) and use the proceeds of the loan to pay off high interest credit cards, auto loans, education loans and medical bills.
But be aware that while paying less interest on loans certainly sounds like a wise idea, there are also certain risks and requirements that are associated with balance transfers:
- Rates offered by 0% balance transfer credit cards are for a limited time. In other words, that fantastic 0% APR or low interest rate may only exist for the first 6 months you hold the card. If you don’t pay off your debt within 6 months (e.g. the introductory period), you’ll find yourself facing higher rates. Find out how long your balance transfer terms will last (the length of the intro period), what the interest rates will be after the intro period is over, and what kind of balance transfer fees you’ll have to pay. This information will help you realize if the move is worth making.
- Personal loans typically require good credit. If you’re struggling to pay your outstanding bills, your credit may already be negatively impacted. This could prevent you from getting a good interest rate on a debt consolidation loan. But if you’ve got reasonable credit, then a good low interest loan may be obtainable through a lending network like Lending Club.
- When you refinance your home to pay off your outstanding loans and credit cards, you are also risking the largest asset you have. If you fail to meet your increased mortgage payments, the bank might repossess your home.
Here are more of our thoughts on how to consolidate debt.
Credit Card Balance Transfer Guidelines
Besides having a limited introductory interest rate, that alluring 0% APR may only apply to balance transfers and not to new purchases. Your new purchases might be charged a much higher interest rate. Find out if payments are first applied towards balance transfers; if so, your new purchases will be accumulating interest charges as you pay off your old balance transfers.
Also watch for additional fees: some credit cards charge up to 3% or more of the transfer amount for balance transfers. If a fee is charged, see if it is capped up to a certain amount so that you don’t pay hundreds of dollars to transfer your balance. Determine the cost of the annual membership fees to see if the savings you receive are greater than the costs of the transfer.
If used responsibly, balance transfer credit cards are a great way to save money, and by shopping around for the best deals, you can certainly come out ahead. Just make sure you’re aware of all the terms of these credit cards before you make a move.