Should We Get a 0% Credit Card to Pay Down Debt?

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Welcome to the “2-Minute Money Manager,” a short video feature answering money questions submitted by readers and viewers.

Today’s question is about paying down debt by using zero-interest credit cards; plastic that offers a 0% introductory rate for six to 18 months.

Watch the following video, and you’ll pick up some valuable info. Or, if you prefer, scroll down to read the full transcript and find out what I said.

You also can learn how to send in a question of your own below.

For more information, see “The 3 Best Balance Transfer Cards Now” and be sure to check out our free credit card search tool. You can also go to the search at the top of this page, put in the words “credit cards” and find plenty of information on just about everything relating to this topic.

And if you need anything from tips on finding the best credit card to finding help with credit card debt, be sure and visit our Solutions Center.

Got a question of your own to ask? Scroll down past the transcript.

Don’t want to watch? Here’s what I said in the video

Hello, and welcome to your “2-Minute Money Manager.” I’m your host, Stacy Johnson, and this answer is brought to you by Money Talks News, serving up the best in personal finance news and advice since 1991.

Today’s question comes from Jpacker:

“We have a credit card that we use for necessities like a refrigerator, soft water tank, etc. It is now at $8,000. We would like to get a card with 0% interest for 15-18 months on balance transfers. We don’t know where to start because there are so many offers out there. Can you recommend a few? And is it safe to apply for these cards online?”

The short answer to your question, Jpacker, is yes. If you can pay zero interest on all or part of an existing credit card balance, there’s no reason not to.

That being said, there are things you need to know about credit cards, especially the 0% interest kind. Let’s go over them, then you can find the best card for your needs right here in our Solutions Center.

Here are some things to know about 0% balance transfer offers.

1. It’s possible you won’t get it

Card offers of 0% are normally made to those with good credit — scores of 700-plus. While card companies typically screen before making offers, if your credit score changes for the worse before you submit an application, they could turn you down.

Remember, offers made by credit card companies are just that — offers. They aren’t guarantees.

2. Mess up once, and you could lose the 0% rate

Be sure to read the fine print. Many cards will include conditions, such as paying on time, to retain the 0% rate. Make a payment that’s one day late, and you could lose the 0% privilege.

3. You’ll probably pay a fee

The fee is the biggest drawback to transferring a balance to a 0% card. The vast majority of issuers charge a fee ranging from 2% to 5% of the balance to transfer to their 0% card.

For example, if you transfer $8,000 to a card that charges a 4% fee, you’ll be paying off $8,320.

That’s why, before transferring any balance, you have to figure out how much it’s going to cost you. While the math is pretty simple, there are calculators that can help determine just how much you’ll save by transferring balances. For example, CreditCards.com has one here.

4. Check the rate for purchases as well as transfers

Some cards offer a 0% rate on balance transfers but charge a different rate on new purchases made on the card, as well as for cash advances. If the amount you’re transferring will devour your entire available credit line, this won’t be a concern. But if not, find out the terms.

5. Have you shopped for the card?

Since applying for credit is a hassle, when you do it, make sure you’re getting the best bang for the buck.

We have a full list of balance-transfer credit cards, as well as 0% credit cards, on this page of our Solutions Center. Simply choose the type of card you want from the menu on the left. You’ll note that some have longer 0% interest promotional periods (meaning how long the 0% interest rate lasts before a higher rate kicks in) than others, and some have lower post-promotional rates, better rewards, lower fees, etc.

You obviously want a 0% promotional rate. But decide on other features you’d like, then take the time to make sure you’re getting the best deal.

6. Are you using a Band-Aid when you need stitches?

There’s an elephant in the room with any balance transfer — namely, the reason you’re juggling debt in the first place.

As justification for carrying a balance, Jpacker says, “We have a credit card that we use for necessities like a refrigerator, soft water tank, etc. It is now at $8,000.”

One-time, nonrecurring expenses are the perfect problem to solve with 0% credit offers. But if you’re habitually living beyond your means, a 0% card is simply postponing the inevitable day when you reach the end of your credit rope.

So, before recommending a balance transfer to Jpacker, I’d ask a couple of questions, like “Why don’t you have an emergency fund?” And “How come you haven’t been able to repay what you borrowed?” Looks to me like you’re living beyond your means. Let’s address that problem, too.

Bottom line? Obviously, whatever the debt, paying less interest is better than paying more. But as you make these transfers, take some time to evaluate what got you here and what it’s going to take to get you out. Then, if you need help, get it. We have a solution for that in our Solutions Center as well.

Hope that answers your question, Jpacker. If you have a question of your own, do what Jpacker did: Simply hit “reply” to any of our email newsletters and fire away. Not getting our newsletter? Fix that right now by going to Money Talks News and subscribing. It’s free, takes five seconds and will make you richer.

I’m Stacy Johnson. See you here next time!

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The questions I’m likeliest to answer are those that come from our members. You can learn how to become one here. Also, questions should be of interest to other readers. In other words, don’t ask for super-specific advice that applies only to you. And if I don’t get to your question, promise not to hate me. I do my best, but I get a lot more questions than I have time to answer.

About me

I founded Money Talks News in 1991. I’m a CPA, and I’ve also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.

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