If used correctly, credit cards can be the cheapest and easiest way to borrow. 0% for 18 months is a steal- but if you don’t pay it back in the allotted time, you can be stuck not only paying the original amount that you owe, but also compounded interest for years. Borrow Smart and you can save $1,000’s of dollars.
Ask yourself first if a credit card loan is right for you
As everyone knows there is good debt and there is bad debt. Many of us were hard hit by the recession and the credit crunch. Getting credit for a simple personal loan has become a paperwork nightmare. So the credit card loan can be an easy solution to settling your debts, but if you lose your job and subsequent income you can get into even worse shape. So pick a card, but not just any card and before you choose one keep this in mind.
Find a card with 0% or low interest while paying off debt
- Avoid using the card for everyday spending – you want to pay off not accumulate more debt
- Budget and schedule your repayments
- You cannot borrow your way out of debt, you can only repay
- If break any of these rules you’ll accumulate more debt and you’ll be in worse shape than you were before
Avoid the debt spiral
Credit Cards can be cheaper than loans and the paperwork is far easier. You can borrow for up to 18 months interest free provided that you-
- Make the minimum repayments
- Set up direct deposit. If you miss a payment you will lose your 0% deal
- Eliminate the debt within the 0% period
- Make at LEAST the minimum repayments
- Pay off the debt BEFORE the promotional period ends if you don’t the rates will skyrocket
- Figure out what you need to pay monthly to get rid of the debt
- If you cannot pay off the debt, figure out the Best Balance Transfer opportunity. If you forget to do this, you will be drowning in high interest and you will be stuck with more than your original debt
How to pick the card best for you
Figure out how you borrow and if you will pay off the card every month. Be honest with yourself. If you are going to pay the minimum one month and then carry the balance over to the next month, you are not paying the card off monthly.
Will you pay the balance off in one year?
If the answer is YES apply for the card which will give you the longest time to pay off your debts without interest. If the answer is NO, you will need to apply for and move your debts to another 0% or low rate card when your deal ends. All the introductory 0% deals apply to ONLY to new cardholders. If your application is rejected, you should immediately go and check your credit rating. You can check your credit for free every 12 months by going to annualcreditreport.com. If you get the card and the balance is credit limit is not enough to cover your debts, apply for a second card with the same introductory 0% or low interest rate.
Watch out for the balance transfer fee
When you transfer your balance from one card to another, the fees can range from one to five percent of the total amount transferred. While a single digit percent might seem small, you should do the math and factor it into the debt. It’s important that you read the fine print when shopping around for the best deal.
Find the longest 0% deals
In order to secure the low cost loan to pay off your debts, you need to scout out the lowest and longest introductory deal. As there are a variety to choose from, you can pick one with added bonuses such as reward points or miles on your favorite airline.
18 months 0% interest balance transfer
|Card||Annual Fee||Rates||Length of Introductory Rate||Rewards & Perks|
Citi® Diamond Preferred® Card
|$0||0% Intro APR on balance transfers and purchases during introductory period. After that, the APR will be 11.99%-21.99% based upon your credit history.||18 months||
Citi Simplicity® Card
|$0 Annual fee with 3% Balance transfer fee||0% Intro APR on Balance Transfers and Purchases during introductory period. After that, the variable APR will be 12.99% – 21.99% based on your credit history.||18 months||
Slate® from Chase
|$0 Annual fee and $0 Balance transfer fee for first 60 days||0% for first 15 months and then varies with personalized Blueprint plans||15 months||
|$0 Annual Fee with 3% Balance transfer fee||0% for introductory period then 10.99% – 22.99% based on your credit history||14 months||
Citi® Dividend Platinum Select® Visa® Card
|$0 Annual fee with 3% Balance transfer fee||0% Intro APR on Balance Transfers and Purchases during introductory period. After that, the APR will be 12.99%-22.99% variable based on your credit history.||12 months||
Keep track of end dates!
The most important thing to keep track of when transferring balances is the END DATE. Mark this on your calendar and send yourself a reminder A MONTH before the introductory deal ENDS! A great way to keep track of all your cards is through TRACK CARDS. Through this site, you can make a payment plan, track your debt and get payment reminders so you are never late. REMEMBER if you are late only one time, your introductory interest rate will disappear and you will Cinderella shoeless at the ball.
Long term low rate deals
If you do not want to keep shifting cards around like deck chairs on the Titanic, get a card with a long term low rate introductory offer.
|Card||Annual Fee||Rates||Introductory Period||Rewards & Perks|
Barclaycard® Ring MasterCard®
|$0 Annual fee & $0 Balance transfer fee||8%||None||Get rewarded with the Giveback program with money back|
Applied Bank® Secured Visa® Gold Credit Card
IberiaBank Visa® Select Credit Card
|$35 Annual fee with 3% Balance transfer fee||0% – 7.5% during introductory period, then 7.5% – 11.5% afterward||12 months||None|
Can you shift debt to long term low interest cards?
Yes, but not always so make absolutely sure that you can BEFORE you apply. If you’re trying to pay off debt, you do not want another card which tempts you to buy more. Ask if the regular rate applies to balance transfers as sometimes the rate can be higher than your new purchase rate. Also, pick a card without a fee and check out if the rate on cash withdrawals is higher than than the regular rate (sometimes it’s more than double the rate). You might want to just set a rule for yourself that you will not use the card for cash withdrawals except in extreme emergencies.
Pros and cons of credit card insurance
Credit card insurance insures that if you lose your job or become disabled, your monthly bill will be covered. It usually lasts for a year and it seems like a great idea until you really look at the fine print. For around $80 a month, it will cover $10,000 in payments. However, if you are self-employed, you will not be covered. Even if your job is covered, you rarely receive what you put in. According to the United States’ General Accountability Office such insurance rarely pays off, “cardholders received 21 cents in tangible financial benefits for every dollar spent.” If you can get insurance it will only cover basic payments and in the long run you will be paying more as your interest compounds. If you have a high balance on your card and are concerned that you might be laid off and still want the insurance, then read the fine print and do not trust the person on the other end of the line trying to sell it to you. One thing you might want to do, is create your own insurance policy. So if the credit card insurance costs $80 a month, you put aside that amount into an emergency savings account which you don’t touch. If you in fact lose your job you’ll have a cushion to leverage against.
What are the alternatives to credit card insurance?
More banks are switching to Debt Cancellation and Debt Suspension products both of which are regulated by the FDIC. Both of these products are offered directly from the bank and not an insurance company and they both have drawbacks. debt cancellation will cover. Debt cancellation will pay only up to a certain amount as specified in your terms and may only cover accidental deaths and not ones caused by illness or natural causes. Debt Suspension will cover your minimum payments and interest may accrue on top of the balance that you owe. If you apply for either of these programs, you most likely will not be able to use your card during the claim period. The other alternatives are the less predatory and more traditional are disability and term life insurance policies. Whatever you decide to do, you should know that none of these policies are required when applying for a credit card.
Rejected from the cards listed above?
Granted for most of the cards, you do need a good credit score to get the 0% balance transfer deals listed above, but there are still ways to secure 0% balance transfers with an average credit score.
|Card||Annual Fee||Rates||Introductory Period||Rewards & Perks|
|Barclaycard® Rewards MasterCard®||$0||0% for introductory period then 24.99% thereafter||6 months||
If your credit is 566 or above you can apply for the Chase Slate Card Slate® from Chase, below that your options for a 0% balance transfer card are virtually non-existent.
Flat out rejected?
Should you date and dump your card?
In relationships you want to be loyal, with your money you want to be smart. If you date and dump and move your debt from one 0% offer to another, you’ll be paying off your debt without paying interest. It’s the most economical and fiscally smart way to use credit card, but you need discipline and a good credit score.
How to dump and date
If you’re new to the credit card dating scene, the process is fairly straightforward.
- Get 0% credit card
- You can spend on this card and all charges with be at 0% interest for the time period set forth. check out the deals below.
- Make repayments
- 0% interest means 0% percent interest will be charged on your purchases. It doesn’t mean you don’t have to repay it. You must make the minimum repayments or the 0% interest deal will be withdrawn and a much higher interest rate will be charged.
- Move or Repay the amount owed before 0% offer expires. If you don;t the interest rate with jump to the standard APR which is around 20%.
- Repay or move the debt to another 0% interest card after the deal ends.
To date and dump or not to date and dump?
Dating and dumping is the cheapest way to get an unsecured 0% interest loan, but you have to be proactive and stay on top of it. If you don’t and your interest rate shifts to standard APR, all the headway you’ve made towards wiping out the debt will be erased and there is a possibility of accumulating more debt than you originally had because of the compounding interest. If you’re going to date and dump, you need to check your credit rating to make sure that you have good enough credit to apply for these 0% cards. So check your credit rating for free BEFORE you start pursuing the offers. Remember every time your credit is pulled can impact your score. If you’re going to take over a year to repay the debt or have a poor to average credit card score look into a card with a long term low rate instead.
How much will you save?
Let’s say you transfer $5,000 worth of debt onto a credit card For a card with 17.9% interest with a minimum payment of $100 per month, it would take you 465 months to pay it off and the total interest would be $13,112. 50 which is more than double your original debt. For the Iberia Classic Credit Card with 7.25% interest with the minimum payment of $100 per month, it would take you 195 months to pay it off and the total interest would be $1,990.12 which is less than half your original debt. For the Iberia Classic Credit Card with 7.25% interest with the minimum payment of $100 per month, it would take you 195 months to pay it off and the total interest would be $1,990.12 which is less than half your original debt. On Citi Diamond Preferred Card you’d pay nothing for 18 months and if you paid $300 per month, you’d be paid off in 17 months. You can figure out how to calculate your payoff and interest with this credit card calculator.