0% Balance Transfers a good idea?!


Question: 0% Balance Transfers a good idea?
I've made some pretty dumb financial mistakes in the past, and am now working on paying off my credit cards. I've paid one off but still have $7,400 on another credit card at 20.99% APR! I know, stupid, right?! The credit card I just paid off is offering me 0% APR until Jan. 2012. After that, the interest goes up to 19.15%, even lower than my current interest! They charge 4% for balance transfers. Given my financial situation, I won't be able to pay the debt off entirely for about 2 years (I'm currently in grad school, so extra money is scarce). Also, I've asked customer service, and they said they do not back-charge interest if the balance is not paid off by Jan 2012, although I'm weary about trusting a credit card company service rep. Is a balance transfer a good idea? It seems like a really good idea to me, but given that I've been pretty financially stupid in the past. Thanks for the help!

Answers:

Making a habit of shifting credit card debt from one card to another is not a good idea. But in your circumstances, it makes sense to shift the balance on that now closed, high interest account to the special 0% offer.

Be sure that you pay at least the minimum payment on time every month and don't go overlimit. Otherwise, you will lose that special interest rate. Try to pay off as much of that balance as you can.

Instead of closing that card, you should have done the balance transfer and just left it open. They may have sent you a special 0% or low interest rate offer in about a year. Credit card companies only offer lower interest rates if you don't have a balance.

BD



Have you spoken with the current cc account holder to see if they will decrease the interest in exchange for closing the account to new charges?

Generally, transfers are only a good idea if you can pay them off within the stated time period of the lower rate.




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