Overview: 0% balance transfers are the get out of jail free cards in the world of credit card debt. On the average, a person can save over $100 in interest for every $1000 they transfer from a credit card with a 13% interest rate. People with 18% interest rates are likely to save about $150 for every $1,000 transferred. And for those unfortunate enough to have been slapped with an absurdly high default rate of 22% or higher, the savings per $1,000 transferred can be $200 or more.
Interest Savings: As noted above, 0% balance transfers can save you hundreds of dollars in interest over the course of a year. With average U.S. household credit card debt above $8,000 and average interest rates at 12%, a typical person can expect to save over $700 on interest in just one year. There truly is no easier way to save $700 without cancelling cable or robbing a bank.
In the not so distant past, when banks were eager to lend money to consumers, it was relatively easy to transfer balances once a year, eliminating interest expenses for years. However, doing so is not that easy today. Nevertheless, a balance transfer a year will do much more for your financial health than an apple a day will do for your physical well-being. To find out how much you can save on interest this year, try our balance transfer savings calculator.
Debt Reduction: On our balance transfers blog, we examined how long it takes to get out of credit card debt with and without balance transfers. Unsurprisingly, a person who took advantage of 0% balance transfers reduced the time and expense of getting out of credit card debt substantially. What surprised us was just how much balance transfers helped.
In our example, we found that a person with a 14% interest rate and $10,000 of debt who paid $500 a month towards their credit card bills would spend almost $3,000 in interest and remain in debt for nine years. Yes, NINE years.
If that same person took advantage of a 0% balance transfer and paid $400 a month, they could reduce their debt by close to 50% in one year alone. If that person were able to get a 0% rate for a second year, they could be debt free in two years.
Even without a second balance transfer, our fictional credit card user would find him or herself debt free in less than 3 years and a few thousand dollars richer.
Stress Reduction: Credit card debt is difficult to come to terms with, and many of us do our best not to think about the plastic time bombs we carry in our wallet. Many people live in denial, pretending it doesn’t exist. This problem is often compounded by the fact that the debt is spread over multiple credit cards. A thousand dollars here, two thousand dollars there. It doesn’t seem so bad until the day you sit down and add it all up.
Hopefully, you’ve found Smart Balance Transfers before things spiraled out of control. The very fact that you’re reading this means you’re facing the problem head on, and I hope the example I demonstrated above has shown you that getting out of $10,000 of credit card debt is not as hard as it may seem on the surface.
Once you’ve transferred your balances and you begin to see your balances decline, a giant weight will be lifted from your shoulders. This, more than anything else, is the true benefit of 0% balance transfers. And the sooner you get started, the sooner you’ll be celebrating the day you become debt free. Just be sure to pay cash for the champagne you open that day!