That’s the dream, right? Pay off your debt without accruing a single cent in interest?
Well, that dream is possible with one simple credit card hack. No, it doesn’t require you to join a cult and sign over your first born or sign any crazy contracts.
All you have to do is be approved for a credit card with a 0% introductory APR on balance transfers and then transfer that debt over and pay it off before the promotion ends.
Of course, it’s not always a fool-proof plan. If don’t correctly, it’s one of the best ways to efficiently pay off debt. If done poorly, it could trap you even deeper in the debt cycle.
What is a Balance Transfer?
A balance transfer is when you transfer your credit card balance from one credit card to another, usually to take advantage of a lower interest rate or better terms and conditions. Many banks now offer a card with a 0% introductory interest rate on balance transfers, which is what you want to aim for. As long as you pay it off before the introductory period ends, you don’t have to pay any interest.
Balance transfers are also a great way to consolidate debt. If you’re paying off debt on three or four different credit cards at once, you’re paying interest on 3 or 4 cards at once, which adds up. Plus, it can be a pain to keep track of. Consolidating the debt by transferring it all to one card will save you time and money.
How Do Balance Transfers Work?
Once you’ve been approved for your balance transfer card of choice, you’ll want to immediately transfer your debts over to this new card. Typically, this can be done online, but you may have to give them a call. It can take a few weeks for the transfer to process.
As soon as a balance shows up on your new card, you want to set up a plan for repayment. The idea is to pay the balance in full before the introductory period ends, so divide the full balance by how many months you have left in the introductory period, and set up automatic monthly payments for that amount. If you have $3,000 in debt and a 12 month introductory period, for example, you’ll want to set your automatic monthly payments to $250.
If you pay off the balance in full by the end of the introductory period, congratulations! You just paid off your debt without incurring any interest fees.