If credit card debt has you all caught up in your feelings, it’s high time you did something about it. You do have options -- one of which is known as a balance transfer card.
But how do you do zero interest credit card consolidation?
Let’s check it out.
Credit Card Consolidation
Using a balance transfer card to pay off debt is a popular way to consolidate your obligations into one monthly payment. The most desirable balance transfer credit cards offer 0% promotional interest rate periods that can last a year or more, providing you with time to erase your transferred balances while dodging interest charges.
After applying for and getting a balance transfer card with a 0% interest promotion, pinpoint which balances you want to transfer. Oftentimes, you’ll be able to initiate the balance transfer process during completion of your application. So, be sure to have credit card numbers and other information at hand when applying. If you wish, you can make more transfers later.
The next step is to await balance transfer completion, which can take between one and four weeks. So, be ready to make at least one more payment on each of your credit cards following transfer, since your balances will keep accruing interest during the process. Pay off your balances after final interest charges post.
Usually, there’s no cap on the number of transfers you can make to one card. The only provison is that those transfers must be kept within the balance transfer card’s overall credit limit. This means that if your transfer plastic has a credit limit of $5,000, you can transfer to your heart’s content as long as the balances transferred don’t top $5,000. Note that you’ll usually pay a transfer fee of 3%-5% for each balance transferred. Check out Bills.com for more information on how this works.
How balance transfers affect your credit depends on your post-transfer actions. If you erase your balances without adding new debt, your credit score should rise. Why? Because the ratio of your available credit to your existing debt determines 30% of your score. As you pare your obligations, the amount of money you owe drops and your score should increase.
However, if you transfer balances and then pile up debt on your old credit cards, your credit score will likely decrease. When the amount of money you owe on your cards increases, your score can take a hit.
It’s a good strategy if you want to clear multiple debts while avoiding high-interest charges. Just be certain to opt for a balance transfer card with the longest 0% introductory period possible. You also want to be sure you can pay off your transferred balances prior to the end of the 0% introductory rate. The interest rate will get jacked up after that promotional period runs out.
Moreover, some zero percent offers will apply interest charges to the entire transferred balance retroactively to the date you made the transfer if the window closes on any unpaid amount at all.
Let’s say you transferred $5,000 with a year to pay it off at zero percent interest. Month 13 rolls around and you’ve cleared all but $50 of the transferred balance. Rather than charging you interest on the $50, you’ll be charged for 12 months of interest on the entire $5,000. Read the terms of the offer carefully to avoid this and be certain to only transfer an amount you know you can clear within the amount of time afforded by the introductory offer.
You can use a balance transfer card to consolidate your credit card balances into one payment each month. Using a transfer card with a 0% introductory APR could give you at least a year to wipe out your transferred balances without accruing interest.
So, now that you know how to do a 0% interest credit card consolidation, just be sure you have a plan to erase your total debt, and resist charging new debt to your credit cards as you pay off the old balances.
Assess your situation and make the best move for you. After all, your new financial future awaits.