Paying Down Debt with a 0% APR Balance Transfer Offer
December 14, 2009 – 1:26 pmThose who have the credit to do so should consider the value of a 0% APR balance transfer. Tough economic times often become a ripe breeding ground for creditworthiness, payment history, interest rates and monthly minimum balances to become irreversibly skewed. In other words, many people take a hit on their credit scores when times get tough.
Some credit card holders use one card to pay the balance on another, and in no time at all, are in trouble trying to maintain a good credit record and good standing on current accounts. This is generally not a good plan for getting your finances under control, but a new credit card with a 0% balance transfer lends some potential mercy for those who feel they are in a crunch and those you know they can be diligent in making payments and sticking to a plan.
Credit Card With Balance Transfer
The way this solution works is to allow the consumer to place all outstanding credit card debts with one lender or financial institution making the credit card offer. This removes multiple balances, several monthly payments, each with a minimum amount due, and steep interest rates that continue to pile on interest to what you already owe.
The 0% APR balance transfer removes multi-fold interest rates and frees you to pay mostly on the principal. The offer usually only applies to the transferred balances so any new charges will likely be charges at the default interest rate for the card. Often, it is possible to negotiate a lower monthly payment than you originally had on all of your outstanding accounts. This, in turn, improves cash flow which allows you to pay more each month paying down the debt quicker.
The first thing you should do when trying to secure the zero interest balance transfer option is to read the fine print. As merciful as these offers are when they come, they also come with deadlines. Many companies suspend the interest rate after only three or six months before placing the interest back on your account. The goal is to choose this as a financing alternative when you are truly able to make a huge dent in the principle in only six months time. And I would not even consider doing this unless the offer was for at least 6 months at 0% interest for the transferred balance. Preferably, I would find an offer that granted the interest free period for a year. That gives plenty of time to make a big dent in paying off the principal.
Of course, being able to take full advantage of the 0% balance transfer offer is completely dependent on your credit scores, other debt, current income and other factors established by the issuing company. If you want to take advantage of it, the best move is to try for approval before your situation becomes too grave for any company to take the risk with you.
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