Paying off credit card debt is a priority for millions of families, especially as it is amongst the most expensive ways for people with good credit to borrow money. According to the Federal Reserve's G.19 consumer credit report in March 2010, the average interest rate on unpaid credit card debt was 14.31%. Although there is usually a fee to transfer credit card debt, a zero interest card means that less interest will be paid. Given that the median APR has been on the increase over the last few years, this can form part of an effective debt reduction strategy from proactive consumers.
How to Qualify for a Zero Interest Credit Card
Whilst electing to transfer credit card debt could potentially save hundreds of dollars, it isn't an option for every customer because not everyone will qualify. Lenders are seeking to cherry-pick the best customers and will only offer zero interest cards to those who have a good credit history and are most likely to regularly use their cards. There are a number of steps that can be taken to improve a credit score from good to excellent relatively quickly. The way that outstanding revolving debt is distributed has a huge bearing on credit ratings. Don't leave old credit and store cards gathering dust, use them.
A Zero Interest Card to Reduce Credit Card Debt Payments
Although there is a fee for transferring a balance, it is an effective way of reducing credit card debt for those who have the necessary self discipline. For example, a customer with an unpaid $10,000 balance will pay an average of $1,431 in interest payments annually. Subtract the 4% transfer fee (about $400) and that customer is able to contribute an extra $1,000 towards paying off credit card debt. It is important to appreciate that the fee will be added to the balance which causes the amount of short term debt to increase.
Transfer Credit Card Debt to a 0% Percent Credit Card
In order to perform an interest free balance transfer, it is necessary to complete the forms of the new provider. This involves submitting information about the existing lender or lenders, not to mention how much each one is owed. The request to move the funds to a zero rate card will be sent to the existing lender and the transfer process will typically be carried out within the next 30 days. A letter will be sent to the customer when the process has been completed.
The Cost of an Interest Free Balance Transfer
There is normally an administrative fee of between 3% and 5%. Fewer lenders now offer 0% percent credit card balance transfer deals and several have now reduced the introductory term. Whilst this is in-part a consequence of the economic climate, it is also a recognition that more customers are performing a process known as 'stooging'. Whilst there is nothing wrong with performing a succession of zero interest card transfers, lenders are only interested in attracting new business from their rivals.
Sources
Woolsey, Ben. (March 26, 2010)." Credit card statistics, industry facts, debt statistics." Creditcards.com.
Asa Ghaffar - Asa has over 10 years of practical experience in loan approval, secured lending, bad credit repair, stock trading and debt management.
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