7 Ways to Get the Most From a Balance Transfer Credit Card

For many the holidays have an unpleasant side effect--debt. It's estimated that the average consumer spent $805 on gifts this past holiday season. It was fun passing out presents in December, but in January the credit card bills start rolling in. For others, the start of the new year brings extra motivation to finally tackle their debt. In either case, consumers flock to 0% balance transfer credit cards at the start of every year.

Transferring high interest credit card debt to a 0% card is appealing. The savings in interest can be substantial and it accelerates getting out of debt. It's nice when the entire credit card payment goes to principal, not interest.

Transferring balances to a 0% card is not rocket science. There are, however, some traps to avoid. Further, not all balance transfer cards are created equal. Some are notably better than others. To get the most out of a balance transfer credit card this season, here are 7 tips to keep in mind.

1. Type of Debt: It's most common to transfer high interest credit card debt to a 0% balance transfer offer. In some cases, however, some want to transfer other types of debt, including school loans, car loans, and medical debt. Not all credit cards, however, allow consumers to transfer non-credit card debt. You can find a breakdown of what type of debt can be transferred for the major card issuers in this guide to balance transfer credit cards.

2. Length of 0% Offer: The longest 0% balance transfer offered today is from Citibank and it lasts for 21 months. After that, the rate on any remaining debt is subject to Citi's regular APR. The offer can be found on the Citi Simplicity card. So if you've been looking for a longer 0% offer, you can stop. They don't exist.

3. Balance Transfer Fee: With one exception, every balance transfer card charges a transfer fee. The fee is typically a percentage of the amount transferred. The most common fee is 3%, which results in a $30 fee for every $1,000 transferred. The one exception is the Chase Slate card. For transfers initiated within the first 60 days there is no transfer fee. The 0% introductory APR lasts for 15 months.

4. 0% on Purchases: Don't confuse balance transfers with offers of 0% APR on purchases. Many cards offer both. With 0% on purchases, the card issuer waives interest charges on revolving balances from purchases for a set period of time, often the same length as the balance transfer offer (but not always). If you need to transfer a balance, make sure the 0% offer applies to balance transfers.

5. Credit Score: Most of the top 0% offers require good to excellent credit. As a rule of thumb, a FICO score of at least 700 or higher should be expected, although many factors go into underwriting and lower scores have been approved.

6. Regular APR: Even the longest balance transfer offers eventually expire. When they do, any remaining balance will be subject to the card's regular APR. As a result, it's important to plan now for how you'll handle this debt when the 0% interest is gone.

7. Think Beyond 0%: While paying no interest for an extended period of time is an attractive offer, many balance transfer cards offer significant benefits. For example, the Chase Freedom card offers a $150 bonus if you spend $500 on the card in the first three months. It also offers cash back of up to 5% and comes with no annual fee. Those benefits are in addition to a 0% APR introductory rate on balance transfers and purchases for 15 months.

No interest credit cards can be an excellent tool to help get out of debt. The key is to avoid any new debt after transferring existing balances to no interest cards. Once transferred, work hard to pay off the card by the time the 0% introductory rate expires. Alternatively, you could transfer the debt again to a new balance transfer card until the debt is paid, a strategy I deployed years ago to pay off my credit card debt.
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