Credit Cards Loans

Maximize Your Debt Payment Impact

For those of you who is tired of paying interests on your debt, you might want to continue reading. Debts are something that everyone have these days and it is so unfortunate. A lot us are trying to be debt-free, but our effort in paying down the debt seems to be curbed by interests.

In this blog, I want to talk about how utilizing the Balance Transfer promotion on credit cards had helped me navigating through my debts with zero interest. This method really work well even if you don’t have Excellent credit. However, at minimum, you must have Good credit in order to qualify for the credit card.

What is Balance Transfer?

Balance Transfer allows you to transfer your existing debts to a new account – in this case a Credit Card Account. When you do this, the credit card company will transfer money to your existing debt. Once this happens, you are no longer owing many to the old creditor, but to the credit card company.

What’s Great About It?

When you open a new credit card account, often times they will give you 0% interest rate for 15 months for any debt balances that you transfer over. This will save you quite a bit of money. Since there is no interest, your payment to the credit card is basically paying down your principal balance. None of the payments will be applied to interest for 15 months. This method will allow you to be debt-free quicker.

What Are The Cons Of Doing This?

To do a Balance Transfer, most credit card companies charges around 3% Balance Transfer Fee. Depending on what kind of interest rate you are currently paying, this 3% might not be enticing. If you normalize the 3% to an annual basis. you are basically paying about 2.4% annually ((3% / 15 months) x 12 months).

Second drawback is that you only have 15 months to pay-off the entire balance. If you do not pay it in full within the 15 months promotional period, you will be charged interest as high as 15% – 25%.

Strategy You Can Use To Avoid The Cons

Find a credit card that does not charge Balance Transfer Fee. Yes, they do exist and I have used them. One example is the Chase Slate Credit Card, which as of October 11, 2019, still offers 0% APR Balance Transfer for 15 months + $0 Balance Transfer Fee (if transfers are done within 60 days of account opening).

Another good one is American Express EveryDay Credit Card. As of October 11, 2019, the card offers 0% APR On Balance Transfer for 15 months with $0 Fee.

These are just a couple example that is currently available out there. Obviously, there are more credit cards out there that offers similar deals. Be sure to review the terms and see if it works for you. You should also look for something with NO ANNUAL FEE in order to effectively do the balance transfer method to pay down your debt.

Secondly, since these credit cards only give you 15 months to pay-off, you should plan to open ANOTHER similar credit card just before the 0% Balance Transfer promotion expires. Transfer over the balance from the old credit card to the new one and you will have another 15 months of 0% interest!

I kept doing this for a couple years until I paid off the debt. Keep in mind that doing this might affect your credit score. However, if you are not planning to take on a major loan (such as mortgage), you should not be worry about credit score. The debt balance keep going down every month, your credit score will increase by itself gradually and eventually back to its normal level once your debt balance is below 20% of your credit limit.

This method has personally helped me a lot. All my payments during the process went to principal. None of it went to interest or fees. Obviously, if you are not savvy enough with the mechanics of this process, please do not do it.

I hope this post becomes an inspiration for you. If you have any other tricks and tips to pay down debt, please let me know. Drop us a line at the comment section below. Thanks!

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