Balance Transfer as a Debt Elimination Solution FAQ
I receive offers for a credit card balance transfer in the
mail every week. Some have interest rates of 0% APR. Should I get
one or more of these credit cards and transfer my credit card
It depends on your overall personal financial picture, including your credit score, your
ability to exercise fiscal discipline and your understanding
of the details of the balance transfer offers.
What if I am in prefect shape financially and I just want to
save some interest costs by paying less interest on the balances I carry each month?
Let me get very picky, and not that I want to insult anyone,
but if you carry a balance on your credit cards EVERY month do not consider
yourself “perfect” in terms of your personal finances.
What level of credit card balance should I have?
With the understanding that many people can not do this, I
would say zero. Credit cards offer major convenience, but you
can gain those advantages and pay the balance each month. Some
people may want to take 0% APR balance credit cards even though
they can pay the balance and invest the money instead. That
case excepted, (I do not recommend this balance transfer and investment
trick and if you ignore me be sure to invest ultra safely),
the goal for your credit card debt should include reducing
it to zero and paying future credit card balances each month
they come due. Sometimes you may make an extra large purchase and take a few months to pay off that balance. I worry more about credit card debt resulting from accumulated small everyday use to purchase daily living items which remains as a balance carried from month to month. Even worse would be a situation where this balance from common expenses put on a credit card grows each month, basically using credit cards to support a lifestyle you cannot really afford.
Won’t getting new 0% APR interest rate credit card and transfering a higher rate balance always help
No, only if done properly, otherwise it may start you down
the road to financial ruin.
What should I do to get the new 0% APR rate credit card, transfer
my old balance and do it right?
Start by looking at how you ran up the old balance. Are you
overspending? Do you need to adjust your budget or credit
Suppose I have no idea where my money goes, I just see my balances
going up each month?
Don’t get any more credit cards until you have a handle on
your spending. Use our home budget tool to discover where you
spend your money each month and create a better budget for
My credit card balance has been the same for years; I just can’t seem to
If you have a steady income, controlled spending and just need
a bit of extra help to wipe out that nagging old credit card
debt the zero balance transfer trick may work.
Why shouldn't I do a debt settlement where I can pay what I
owe at a discount or use a counseling service where they do
all of the work for me instead of a balance transfer?
In both of those both cases of debt relief throught settlement and non-profit credit counseling your credit score takes a big hit. If
you can still get one of these 0% interest credit cards your
credit score must still be in fairly good shape. Keeping up
your credit score should be a goal. If you don't know what you credit score is you should check it.
How should I proceed with getting the new credit card with a 0% APR and staying
out of debt trouble?
After you get the new zero interest card and transfer the balance, cancel
the old credit card.
Why should I cancel the old credit card?
One of they worst debt problems I ever saw in my career as
a debt attorney involved people who took offers of new credit
cards just to transfer balances. The stories went like this: “We
didn’t know what to do with our credit card debt, what a hole,
we couldn’t climb out. Than we got a new credit card offer
with a balance transfer and cash advance option in the mail,
like a miracle, our prayers were answered. Six months later the
same thing happened and another offer saved us again.” How
long has this cycle been going on I would ask. Most times the
answer would be many years. And their total credit card balances? In most
cases these people managed to accumulate over $100,000 in debt!
For some reason the $100,000 mark seems to be the number for a wake
up call, but it also a level of debt so high for most people
that from there bankruptcy remains the only option to eliminate the credit card debt. This kind of credit card debt abuse ranks as a leading cause of bankruptcy.
So you are saying to cancel the first credit card so you remove the
ability to accumulate more credit card debt?
Yes. You get these offers because you pay your bills on time.
The credit card companies do not know that you may be struggling
to make that payment or worse that you took a cash advance
from another card to make it. Do not make the mistake of thinking
that if you get offered a credit card you must be in a position to
accept it or that somehow the credit card company knows your
financial situation better than you do and if they offered
you a card it must be a smart idea.
Then start to charge on the new credit card?
No, I suggest you NOT charge on the new credit card if you
took the card to transfer your balance to a 0% APR account because
you were having trouble with the payments of your previous
credit card. Instead, you should just make every effort to
pay the card balance before the zero interest period expires.
Expires! What is this zero interest expires part?
None of these 0% APR interest rate credit cards gives you the 0% APR interest rate
forever. In most cases the zero part only lasts six months or a year.
In addition, be aware that if you miss a payment or violate
some other term it may jump from the 0% APR immediately, sometimes to 20% APR.
How much should I pay on the new credit card every month?
Look at your balance and how long you will get the 0% rate.
Try to arrange your payments so that you have the balance paid
in full before the interest rate goes up.
If I need more time could I transfer that balance to another 0% APR credit card
I have seen people do it, but I don’t suggest it.
Can anyone get these 0% APR interest rate credit cards?
No, you have to have pretty good credit to receive one. If
you begin having trouble and you hope to use one of these 0% APR credit
cards to help you get out of the old debt you have to set things
in motion before your credit degrades to the point that you
lose this option. If you have no idea where your credit stands
get a credit report on yourself. If you stand close to the score needed you may want to try some tips to raise your credit score fast.
Why would these companies offer credit cards at a 0% APR interest rate?
The card company makes money several ways. They hope you will
charge items on the new card, they make money each time you
charge. With these cards they hope you keep the card in the
long run and continue to use it. Some companies hope you do
not pay the balance and you will pay them interest on the balance
after the zero offer runs out. Do not figure they will be encouraging
you to pay off the balance; in fact they may try the opposite
and get you to charge more and transfer more. Sometimes they know you tend to carry a large credit card balance and they expect you will not pay any of it down.
What are the biggest risks of these 0% APR interest rate credit cards?
That you use the new credit card to charge more and use the old credit
cards to charge still more and not pay the old balance or the new balance. I said it
before, but it is so important I'll say it again. You must remain
disciplined. If you worry that by having the credit availability
you will use it, this may not be the right plan for you.
How many companies offer these cards?
Many more now than years ago. Just read all the terms and conditions very carefully.