Carrying A Credit Card or Loan Balance?

You’ve heard me state over and over (and over) that if you carry a balance on your credit card(s), you absolutely should not start applying for cards for the travel benefits. The interest that you pay on said cards will, by far, negate any benefits that you receive. I guess it’s not surprising that I have received questions from several who do carry balances asking if there is anyway to leverage credit cards to help pay those balances off, and maybe garner a few benefits along the way. And, the answer is a resounding yes!

I think just about everyone pushes the boundaries with what they can afford at some point in their life. Whether it’s a laptop crashing before finals in college or a car breaking down with no savings to pay for the fix, credit cards are the fall back for many. If this is you, you’re not alone. But I’m not going to get into the hundreds of strategies to get back on track. There are so many out there and it’s so easy to find them. What I am going to suggest is that you look into 0% interest credit cards to help you pay off your balances quicker.

From my perspective, there are two 0% interest credit card types out there. One is 0% on new purchases and the other is 0% interest on balance transfers from other credit cards or loans where you’re paying high interest.

Let’s start with 0% interest cards on new purchases. There are lots of cards out there that offer 0% on new purchases. The Discover It card and Chase Freedom are both great choices. However, the best offer out there couples both 0% interest on new purchases for 15 months with 2% cash back. With the Citi Double Cash Card, not only do you have 15 months to pay off your balance before the higher interest rate kicks in, you also get 1% cash back when you make a purchase and 1% cash back when you pay that purchase off. 2% is about the best you’re going to do for rewards these days and that coupled with the 0% interest and no annual fee makes this a great card for those who need a little time to pay their balances off. Keep in mind that while Citibank advertises a 0% interest on balances transfers too, those transfers come with a 3% transfer fee.

That brings me to the best card out there for transfers of balances that are already incurred. In my opinion, balance transfers from cards that are currently charging between 15 – 25% interest is where the most money can be saved. Oftentimes, by the time you need a 0% interest option, it’s too late to apply for a card. It’s much more common to run up a balance on a card because there is no other option for the expense. And transferring these expenses from a high rate credit card to a 0% interest credit card is a great move.

The problem is that while there are many cards out there that advertise 0% interest on balances transfers, almost all of them have a balance transfer fee around 3% of the balance transferred. That can be a lot of money, depending on the size of the balance.

Luckily, there is one card out there that offers both 0% interest for the first 15 months and no balance transfer fees for transfers made in the first 60 days of card membership. The Chase Slate card also offers 0% interest on new purchases as well. So, if you’re paying high interest on any card or loan, it’s in your best interest to move the balance to the Slate card.

There are a couple of ways to figure out how much of your balances to move and how to manage the balance that you transfer. One is to figure out how much you can manage in a monthly payment for 15 months and then extrapolate your balance transfer amount from there. You’ll then pay that for the 15 months with 0% interest and be done with that debt without paying a penny in interest or fees to the bank. Depending upon your overall debt, you may still be left with high rate interest, but making this move will start to whittle your overall balance down.

The second way to do it for a married couple would be to again figure out how much you can afford to pay towards your debt each month and then multiply that by 15 months for a total balance transfer amount. Then double that. Basically, by the end of 15 months, you’ll be left with half of what you initially transferred. A month or so before your 0% interest rate is due to increase, your spouse applies for the Slate card and you transfer the remaining balance to that card once your initial 15 months is over. You then continue to pay the same monthly balance for 15 more months until the total debt is gone.

The amount of money you can save over 30 months by not paying interest is huge. Keep in mind that the Slate card is issued by Chase so it’s best not to have many credit card applications on your credit report from the year prior in order to be approved.

Bottom line is you can save a bundle through 0% interest credit cards on purchases and balance transfers. And some even allow you accumulate cash back benefits while you’re paying down your debt. A pretty sweet combination if you ask me!

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