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How Long do Credit Card Balance Transfers Take? |
To say that getting out of credit card is difficult is an understatement. A person with $5,000 in credit card debt paying a 14% interest rate can expect to spend close to $1,000 over the course of three years to be debt free. This figure assumes a steady monthly payment of $200 and no new charges.
Fortunately, consumers with good credit can reduce both the time and the money wasted on interest substantially by taking advantage of 0% balance transfer offers. Just how much you can save by transferring high interest balances to 0% credit cards may surprise you. During one year, a 0% balance transfer can provide over $400 in savings and reduce your overall debt by 45%. Below, you can analyze the savings on a month by month basis and see how you can utilize balance transfers to get out of debt in as little as two years while saving hundreds of dollars on interest.
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Reduction of Debt with a 0% Balance Transfer
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Reduction of Debt without a Balance Transfer
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Months
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Fees
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Monthly Payment
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Ending Balance
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Months
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Interest
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Monthly Payment
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Ending Balance
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1
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150
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200
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4950
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1
|
58
|
200
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4858
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2
|
0
|
200
|
4750
|
2
|
57
|
200
|
4715
|
|
3
|
0
|
200
|
4550
|
3
|
55
|
200
|
4570
|
|
4
|
0
|
200
|
4350
|
4
|
53
|
200
|
4423
|
|
5
|
0
|
200
|
4150
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5
|
52
|
200
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4275
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|
6
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0
|
200
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3950
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6
|
50
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200
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4125
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7
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0
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200
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3750
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7
|
49
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200
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3974
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8
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0
|
200
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3550
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8
|
46
|
200
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3820
|
|
9
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0
|
200
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3350
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9
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45
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200
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3665
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|
10
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0
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200
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3150
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10
|
43
|
200
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3508
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|
11
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0
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200
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2950
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11
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41
|
200
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3349
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12
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0
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200
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2750
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12
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39
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200
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3188
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Total Fee Expense
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Total Payments
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Total Debt Reduction
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Interest Expense
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Total Payments
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Total Debt Reduction
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$150
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$2400
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45%
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$588
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$2400
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36%
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How Balance Transfers Help |
After 12 months, a person who does a 0% balance transfer will reduce their debt by 45% and save $588 on interest. While standard balance transfer fees of 3% will reduce interest savings by $150, a person who uses a 0% balance transfer credit card will save $438 over the course of 1 year and reduce their credit card debt 16% more than a person who does not take advantage of a balance transfer.
If it is possible to obtain a new 0% credit card when your initial 0% period expires and you continue to make $200 monthly payments, your total credit card debt will be reduced to $432 at the end of 2 years. If you increase your payment to $240 a month during the second year, you will be debt free in just under two years!
Because it may be difficult to obtain a 0% APR a year from now, if we assume the interest rate on your new credit card goes from 0% to 14% and you continue to pay $200 a month, you will be debt free in 2 years and 4 months, having spent only $282 in interest.
Without balance transfers, getting out of $5,000 in credit card debt at a 14% interest rate will take a total of three years. In that time, you will have racked up $947 in interest expenses. Thus, even if you are only able to obtain a 0% APR for 1 year, you can cut your interest expense by over $600 and get out of debt 8 months quicker.
If, on the other hand, you are fortunate enough to qualify for a 0% rate today and again next year, you’ll be debt free in two years and close to $1,000 richer. This is a deal that seems too good to be true, but the numbers just don’t lie.
For information on credit cards currently offering 0% balance transfers, please see the balance transfer credit card section of this website where you can compare deals and apply online.