Friday, 5 June 2020

Should You Take Advantage of a 0% Credit Card Offer?

Should You Take Advantage of a 0% Credit Card Offer?
18 Sep
5:38

Hey everyone, Bridget from Money After Graduation here and today I'm answering a subscriber question which is, should I take advantage of a promotional low-interest transfer rate for my credit card debt? Now if you owe thousands of dollars on a credit card, you probably noticed that the interest rates are crazy You're easily paying 20% or more on interest on your credit card

And for any balance, this can amount to hundreds of dollars a month and over a thousand or multiple thousands of dollars in interest per year When you're trying to pay off debt, paying high interest rates can really eat into your progress So one of the best things you can do is find a low-interest solution to help reduce the carrying cost of your debt and let you pay it off faster One of these potential ways to do that is to take advantage of 0% or 099% interest rate on a credit card

If you have good credit, a credit card company might send you this offer in the mail for a card do you already have They'll offer something like 1% or even 0% for six months or a year or 18 months if you transfer balances from one of your other credit cards to this credit card At first glance, this probably looks too good to be true because why would you pay 20% or 21% on a credit card debt when you can pay 0% But you're not actually paying 0% or 1%, there are always associated fees and costs with transferring the balance from one credit card to another The first thing you should do is read the fine print very carefully

Even though it's offering you a 0% or 1% interest rate, usually the transfer fee is anywhere from 3% to 5% This means your overall cost of moving the debt will end up being about 5% or 6% which is still much lower than it would be if you just left it on the 20% or 25% or 30% card The other thing to know is you'll only get a special interest rate for the promotional period, whether this is six months or one year And as soon as that ends what will happen to your balance, if you're still owing it, is they will count it as a cash advance from your credit card A cash advance from your credit card typically has an even higher rate than purchases

You're looking at paying 23% or 24% or more — the same as if you had actually withdrawn cash from the credit card at an ATM Pay special attention to how this is calculated because sometimes it will just be calculated on or balance you have remaining but sometimes they will even back date it too when you first transferred the credit card balance If you get hit with a higher interest rate or tons of fees at the end of the promotional interest period, it's like you never got a break at all For this reason, when you're considering transferring your balance from one credit card to another to take advantage of a promotional rate, make sure that you can pay it off in full in the time allotted Otherwise, what you end up doing is just rotating the balance on tons of different credit cards forever

So the short answer is yes, a promotional low interest rate can definitely help you eradicate your debt if you handle it responsibly That means reading all the fine print so you know exactly how much you'll be paying and having a plan to pay the debt off in full during that time frame Finally, the most important thing you can do is to not ring up that credit card again that you transfer the balance from So if you're opening a new credit card or you're moving the debt to an existing card with no balance, make sure you cut up the original card and stop using it until your debt free The last thing you want to do is move that balance over and ring up an all new one exactly where you started

I hope you found this video helpful and learned something new today If you enjoyed it please give it a thumbs up and leave a comment below letting me know how you're dealing with your consumer debt and what strategies you're using to pay it off If you want to see more personal finance videos please subscribe to my channel and I will see you next week

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