Does your wallet feel a little heavy? Maybe it’s your credit cards. In a report issued January 2010, the Federal Reserve Bank of Boston estimated that Americans are toting 609.8 million pieces of plastic, about 2.7 credit cards for every U.S. adult. Or maybe it’s the sheer volume of your revolving debt that’s weighing you down. Varying sources estimate that the average U.S. household is carrying somewhere between $7,168 and $14,750 in revolving credit card debt. The average APR on those balances is 13.67%. You can get a handle on your high-interest debt by shopping for low-interest rated credit cards online, especially those that offer zero-interest balance transfers. Here’s what you need to know.
Let’s say you have 2 credit cards with APRs of $14.99% and a total balance of $5,000. If you pay $100 a month and don’t charge anything else on the cards, it will take you 70 months to pay off your debt and cost you $2,902.65 in interest. Shop around for an introductory rate of 10.99%, transfer you balances and the same loan can be paid off in 68 months, but you’ll save $1,180.68 in interest. Up your monthly payments to $200 at the balance-transfer rate and you’re out of debt in 29 months and you’ve paid only $707.37 in interest.
That’s great, but it can get even better if you find a zero-interest balance transfer offer. One of the best we’ve seen lately offered 15 months zero interest, although when they do kick in, the variable rates of 11.99% to 20.99% were higher than shorter term zero-interest offers. If you transfer your $5,000 in high-interest debt to your new account and pay down the balance at $200 a month for the first 15 months, you’ll have cut $3,000 from your debt load. After the introductory period, even at the top 20.99% rate, if you maintain your $200 monthly payment and make no new purchases, you could be out of debt in another year at a cost of $219.27 in interest.
The key to winning the zero-interest balance transfer gambit is discipline. Get the card, put it in a deep freezer under a side of beef and pretend you never saw it. You could save thousands of dollars in interest. And, your FICO score—the rating that measures your creditworthiness and decides whether you qualify for the most desirable credit offers – should improve dramatically.
But let’s say you saw the handwriting on the debt wall several years ago and you’ve already paid off your high-interest credit cards. You’re in an even better position to profit by shopping for credit cards offers online. Not only may you qualify for the best interest rates and no annual fee, you can also take advantage of rewards, discounts, bonus points and cash back programs. Many popular consumer credit cards give out rewards that can be redeemed for air travel, groceries, gasoline, car rental, hotel nights and retail purchases at select stores when you meet the minimum usage requirements.