A year ago, the longest 0% balance transfer offers lasted 12 months and many credit card companies were only offering 0% deals for 6 or 9 months. Today, there are two credit cards that offer a 0% APR on balance transfers for 15 months and one that offers a 0% APR for 18 months. These are among the longest 0% credit card offers in history and, in my opinion, they won’t be here for long.

The reason I am concerned about the longevity of these 0% offers is simple. Last year, many major credit card companies lost customers by raising interest rates, cutting credit limits, and adding fees. To make up for all the lost accounts, credit card companies like Citibank have boosted promotional deals to lure in new customers. To keep pace, other companies like Discover have increased the length of their balance transfer offers.

Unfortunately, the very long balance transfer offers available today are essentially a test. Banks are trying to find out what they need to offer to bring in new customers and extending 0% interest periods is just one trick in their extensive toolbox. Generally, tests such as these can last anywhere from a few months to a year or more. However, the uncommonly long length of these deals leads me to believe they will only be available in the short term. Continue Reading »

If you want to reduce credit card debt without paying a fortune in interest, 0% balance transfer credit cards can be an extremely helpful tool.  With a 0% balance transfer, you pay a small transaction fee and no interest for the length of the 0% interest period.  With current balance transfer offers lasting up to 18 months, this can translate into hundreds of dollars in savings and reduce the time it takes to get out of credit card debt by years.

Here’s an example using the Citi® Platinum Select® Card which currently offers a 0% APR on balance transfers for 18 months and charges a 4% balance transfer fee.  A person with $5,000 in credit card debt will pay a $200 balance transfer fee and no interest for 18 months.  Assuming a $100 monthly payment, at the end of the 0% interest period, that person’s credit card debt will be $3,400.  This amounts to a 32% reduction in credit card debt in a year and a half. Continue Reading »

Even if your credit card debt seems manageable, are you really aware of how interest payments affect your wealth in the long run? The cumulative effects of debt interest can impact your savings more than you think.

Credit card debt is a fact of life for most Americans. In fact, one in three households carries credit card debt of more than $10,000. Add to this the fact that the average interest rate on credit card debt is nearly 15% and rising, and we can see a potential for economic catastrophe. One solution to this looming crisis is education – more Americans need to learn about the potentially destructive effects high interest payments have on their wealth, and what they can do about it.  Continue Reading »

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.