Earlier in the year, when credit card companies were raising interest rates into the stratosphere, I started advising consumers to get on the phone and politely annoy their credit card company into lowering their rates.  Many people who were slapped with interest rate increases were offered the chance to opt out of the rate increases by closing their credit card accounts.  However, credit card opt out notices suspiciously looked a good deal like junk mail, and many simply tossed them in the garbage.  A few months later, APRS that were once in the high single digits skyrocketed to 15, 20, or even 29%. Continue Reading »

A visitor recently questioned the effectiveness of using balance transfer credit cards to get out of debt.  His skepticism was well reasoned, as it is hard to fathom just how expensive credit card debt can be.  In my opinion, the visitor was more in denial about how much interest the average person with $5,000 in debt pays over the course of a year then he was about balance transfers.  Similarly, its equally difficult to fathom how long it can take to get out of debt with an interest rate in the mid teens, let alone a default rate in the twenties. Continue Reading »

While consumers with good credit and manageable credit card debt can often utilize 0% balance transfers to quickly and inexpensively extricate themselves from credit card debt, many consumers either have too much credit card debt or lack the credit needed to qualify for a low rate balance transfer.

If you fall into the latter category, the best approach to getting out of credit card debt may be the use of a consumer credit counseling service.  Unfortunately, the web is littered with shady debt consolidation firms promising miracle debt reduction.  Continue Reading »

If you’re looking for a good scare, there’s a new credit card debt payment calculator available from the Federal Trade Commission.  This tool, while useful, actually underestimates the horrors of getting out of credit card debt.  The issue with this credit card debt calculator is that it makes some bold assumptions that ultimately underestimate both the time and the cost of getting out of debt.

For example, using the FTC calculator, a person with $10,000 in debt on a credit card with a 14% interest rate will spend $2,996 in interest and need NINE YEARS to pay off their credit card debt.

Unfortunately, the reality is much worse, especially if a person only pays the monthly minimum.  One reason for this is the assumption that a person will make equal payments of $500 per month, every month, for NINE YEARS and make no new charges.

In reality, most people will have a hard time coming up with $500 per month, especially if they are only required to pay 3% of the balance.

As disheartening as it may seem, it could take a person much longer than a DECADE to pay off $10,000 in credit card debt and the interest expense could easily be $5,000 or more.

That, dear reader, is the sad and unnerving truth. 

Now, please don’t let this scare you.  Facing credit card debt is scary, but necessary.  And there are steps a person can take to reduce interest costs, especially in the short term.  As the title of this website implies, making smart balance transfers can help REDUCE the COST of repaying credit card debt and REDUCE the TIME it takes to do so.

Here’s an example, using our balance transfer calculator, of how a person with $10,000 of credit card debt at a 14% rate can get out of debt with less pain and lower expenses.

Step 1:  Transfer you balance to a credit card that offers a 0% APR for 1 year.  While this will incur a 3% fee equal to $300, you will save over $1400 in interest over the course of one year.  Once the fees are subtracted, you will have a net savings of over $1,000 during the next year.

If you pay $500 a month during the next year, your balance will be reduced to $4300 by the end of the year.  You’d be halfway home already.  Even if you only pay $400 a month, you’ll still eliminate close to half your debt in one year.  Not nine.

Step 2:  At the end of 1 year, transfer your balance to a different card that offers a 0% interest rate.  This, unfortunately, was much easier to do during the past few years.  However, people with very good credit may be able to do this.  So, assuming you can get another year with no interest, you’ll only need to pay $400 a month and voila, you are out of credit card debt in two years.

Now, because it may be difficult to get a 0% rate next year (or perhaps next month), lets assume you now have $4500 in credit card debt at the same 14% interest rate.  Using the FTC debt calculator, it will still take 8 years and cost over $1300 in interest to get out of credit card debt.  However, this assumes a monthly payment of only $225.  If you pay down your debt by $400 per month, you’ll be free of credit card debt in about a year and a half.  Add in the year with the 0% APR, and the total time to get out of $10,000 in credit card debt is under three years.  That’s a lot less painful and expensive then nine years.

0% balance transfers are an essential tool for consumers looking to get out of debt.  Unfortunately, credit card companies are making it tougher to get 0% rates every day.  However, if you act quickly and apply for a balance transfer credit card today, you can save yourself a lot of money, a lot of stress, and a lot of time.

Credit card debt can be nightmare.  Belive me, I’ve been there.  And I’ve gotten out.  In the past five years, I’ve helped a lot of others as well.  If you’re reading this, you’ve made the most important step:  you’ve faced your credit card debt situation head on.  The next step is to get it under control.  And the place to start is with a 0% balance transfer.  You can view details of these offers, apply online at our website, and start the process of getting out of debt today. 

For additional information on current balance transfer options, please see the 0% balance transfer comparision section of Smart Balance Transfers.

For better or worse, I’ve been in the credit card industry for five years.  During most of that time, consumers had a wide range of low fixed rate and 0% interest offers available to help them get out of credit card debt.  However, during the past six months, just about every credit card company has made it more difficult for consumers to obtain these rates.  In my opinion, things will continue to get worse for consumers with credit card debt before they get better.  I’ve been writing about this for quite some time, and if you take a few minutes to review some of the older posts on this blog, you’ll see that I’ve been right most of the time.

Unfortunately, consumers actively trying to reduce their credit card debt have a lot less options today than they did one year ago.  The reason for this is quite simple:  no one wants your debt.  Last year, banks fought over new customers, offering 0% rates that lasted for 15 months, no fee balance transfers with 0% rates that lasted a year, and fixed for life rates as low as 2.99%.  Today, those lucky enough to get approved for a new credit card can still get a 0% APR for a full year.  However, qualifying for these offers is getting more difficult by the day and, in the very near future, 0% balance transfers may not be available at all.

If you are serious about getting out of credit card debt, the first step is to apply for a credit card that offers a 0% APR on balance transfers for 1 year (you can compare offers here).  With a 0% interest rate, a person with $5,000 in credit card debt with a 14% interest rate can save close to $750 in interest charges alone.  And, although standard 3% balance transfer fees will reduce total savings to $600 for a year, the money you save on interest can be used to pay down your credit card debt instead of paying down newly accrued interest charges.

Failing to take action to reduce your credit card debt will only make matters worse.  If, for example, you chose to start getting out of credit card debt one year ago, you could have moved your high interest balance to a credit card with a 2.99% fixed interest rate for life.  Today, that is not an option.  Tomorrow, getting a 0% rate for a year may not be an option.  And as these options disappear, credit card companies continue to raise interest rates on consumers with good credit and long histories with their company.

The behavior of credit card companies towards consumers is utterly abhorrent.  Sadly, however, any person with credit card debt is at the mercy of their credit card company.  If you are reading this, then you are taking a step in the right direction.  The next step is to apply for a balance transfer credit card and secure a 0% rate while you can.  Otherwise, you may extend the time you spend in credit card debt hell even longer. 

For additional information on available 0% balance transfer offers, please see the appropriate section of this website.

Should you have any questions or comments, please feel free to leave a comment below or contact me directly.

I congratulate you for taking steps to get out of credit card debt, and hope my plea encourages you to take action.

The Federal Trade Commission, which counts consumer protection among its many mandates, has recent released a credit card debt calculator that yields some disturbing results many consumers may not wish to see.  The calculator, which uses the assumption that you will only pay the minimum monthly payment, is a stark reminder to consumers of how insidious and difficult credit card debt can be.

Using the FTC calculator, I input the average American household credit card debt of approximately $8,000 and used interest rates of 10%, 12%, and 16% to find out how much long it would take, and perhaps most importantly, how much it would cost to pay off that debt by paying only the minimum payment.  My findings were a little unnerving.  Here are the examples:

1. A household with $8,000 in debt on a credit card with a 10% interest rate will spend $1,570 on interest over the course of EIGHT YEARS by paying $400 per month and adding no new credit card charges.
2. A household with $8,000 in debt on credit card with a 12% rate will spend $1,962 over the course of NINE YEARS by paying $400 a month.
3. A household with $8,000 in debt on a card with a 16% APR will spend a shocking $2,852 over close to a DECADE, again paying $400 a month.

Given these frightening figures, including the fact that, as a person reduces their overall balance, the required monthly payment will drop, I think the FTC calculator probably understates the length of time, as well as the interest cost involved.  For example, when the debt amount is cut in half, consumers would be tempted to pay $200 instead of $400.  Doing this could increase the time to repay debt by two or three YEARS, if not more.

In my opinion, the purpose of the calculator is to both educate consumers and make debt repayment seem reasonable.  However, with double digit interest rates, I think it is fair to assume that it will take most households at least a decade to get out of debt.

Fortunately, for the time being, credit cards are still offering 0% interest rates on balance transfers for 1 year ( I emphasize still, as many companies are dramatically pulling back on these offers, and a visitor to site in three months may find that 0% balance transfers only last for 3 or 6 months.)  Nevertheless, 0% balance transfers are still here, and doing a 0% balance transfer can help reduce the time it takes to pay off credit card debt substantially.  In the process, hundreds of dollars can be saved in interest.

Using both the balance transfer calculatorat our website and the FTC’s repayment calculator, we came up with some credit card debt repayment figures that are much easier to digest.  In fact, with 0% balance transfers, getting out of debt can take a fraction of the time it would take without them.  Here are a few examples:

1. If a  household with $8,000 in debt at a 10% rate does a 0% balance transfer and pays their debt down $400/month during that year, they will have $4200 in debt at the end of that year.  Then, using the FTC calculator, it would still take 7 years to repay the debt.  However, this assumes a monthly payment of only $210.  Better yet, the total interest cost will only be $810, more than $700 less than the orignal amount.  That’s not bad at all.
2. The same debt load on a card with a 12% rate would also take 7 years to repay.  However, the payments are only $210 and the total interest cost is $1,012, nearly half of what it would have been.
3. Lastly, an $8000 debt at a 16% interest rate obviously provides the most savings.  How much?  Instead of racking up close to $3,000 in interest expenses, the total cost to pay off the debt is $1,470, or less than 50% of the original amount.

It goes without saying that getting out of credit card debt is never easy.  However, the smart use of balance transfer credit cards that offer 0% interest rates can shave years off the time it takes to repay debt while saving hundreds, even thousands of dollars in interest.

To find out how much you can save with a 0% interest balance transfer, you can use our balance transfer calculator.  If you are ready to start saving, you can apply online for a 0% balance transfer credit card in the appropriate section of this website.

Getting out of credit card debt is always much harder than getting in to it.  However, the smart use of balance transfers can help you get on the right track and limit your interest costs substantially.