Question about 0% Interest Debt Transfer CCs

[Lindahfx]

Question:

If you move high interest cc debt to a time limited 0% interest cc (for say 9 or 12 months) but still have other cc's at high interest, should you focus on maximizing payments on the 0% int. cc to pay down as much principal as possible until the interest rate increases and then implement the snowball effect across all ccs? Or should you focus on a cc with high interest rate during the low interest rate on the transfer cc?

[bjl584]

You should definitely pay of the 0% card before the introductory rate expires, or you will have to pay back interest.
I'd be careful though, as there is probably a fee to transfer a balance.

How much are you wanting to transfer, and how much will still be left on the other cards.
Having a total debt number would be helpful in answering your question

[disneysteve]

Question:

If you move high interest cc debt to a time limited 0% interest cc (for say 9 or 12 months) but still have other cc's at high interest, should you focus on maximizing payments on the 0% int. cc to pay down as much principal as possible until the interest rate increases and then implement the snowball effect across all ccs? Or should you focus on a cc with high interest rate during the low interest rate on the transfer cc?

You definitely want to pay off the 0% card before the 0% promo expires, as said above. Otherwise you lose the benefit. So don't transfer more than you can pay off in that time.

Beyond that, if you can afford to pay extra, pay it on the high interest cards as that's where you'll get the most benefit. Extra dollars should always go to the highest rate debt. Just be extra sure you pay off the 0% card in time.

[Petunia 100]

Well, I will dissent. If you have multiple credit card balances, send your extra money to the highest interest rate debt. Credit card balance transfers do not have deferred interest, so that is not a concern. And transfer ALL of it to 0% if you can, as long as the transfer fees (if any) do not negate the benefit.

[myrdale]

Neither. I'd avoid all of the gymnastics and work on paying off the credit card with the smallest balance while only paying the minimum on the others.

[disneysteve]

Neither. I'd avoid all of the gymnastics and work on paying off the credit card with the smallest balance while only paying the minimum on the others.

There are 2 general approaches: snowball and avalanche.

Snowball is what myrdale describes. Put every spare dollar toward the smallest balance regardless of interest rate. Pay the minimum on everything else. Once that small one is gone, snowball that money into the payment on the next smallest. This method tends to be more motivating as you see the number of debts decrease faster.

Avalanche has you put every spare dollar to the balance with the highest interest rate regardless of balance. Once that's paid off, move the money to the next highest rate. This method saves you more in interest over time but it can be less motivational because you don't see the number of debts decrease as much.

Honestly, for most people, there isn't a huge difference. You might be talking about a difference of a few hundred dollars either way on thousands of dollars of debt. So pick the method that works best for you.

I don't have any fundamental problem with making use of 0% offers if you do it properly. Just always remember that you can't borrow your way out of debt. Much better to focus your time and attention to cutting spending and boosting income to free up cash to throw at the debt to get rid of it as soon as possible.

[myrdale]

Honestly, for most people, there isn't a huge difference. You might be talking about a difference of a few hundred dollars either way on thousands of dollars of debt. So pick the method that works best for you.

I don't have any fundamental problem with making use of 0% offers if you do it properly. Just always remember that you can't borrow your way out of debt. Much better to focus your time and attention to cutting spending and boosting income to free up cash to throw at the debt to get rid of it as soon as possible.

It would be interesting to run the numbers and see exactly how much more is saved going after the high interest, the 0%, or smallest to largest.

The biggest concern I have about the shell game of consolidating debt is the possibility of the credit lines not being closed, then maxing them out again for even more debt. So long as those lines are closed immediately after transferring the balance over, I'd have less heart burn over it.

[MoneyMediatorMaven]

I'm a big fan of doing it this way (if you want to save the most interest): Transfer as much as they'll let you transfer from your highest interest rate card to the 0% interest rate card. Stop adding any new debt to any credit cards. unless you're paying it all off each month. Racket down to only the minimums on every card EXCEPT for the one with the highest interest rate. Pay the minimum required on the 0% card and put everything you can toward the highest interest rate card. (If you have several cards that are the highest, pick the one with the smallest balance so you can watch yourself pay off a card quickly. As Petunia 100 said, you're not going to get hit with accrued interest during the 0% rate. You'll only start paying interest once that zero interest period ends. At that point, you will have already paid down a bunch of debt and can either find another 0% interest rate for another period, or simply keep paying off the debts as you go. Transferring money to a 0% interest card does usually cost you 3%-5% of the balance, so you are technically paying 3%-5% on what you transfer. So, make the most of the time they give you at zero interest and make sure you're not adding any new debt to any of your cards or you're defeating the purpose. Pare down to what's truly essential and then use only a debit card. Hope that helps!

[Petunia 100]

It would be interesting to run the numbers and see exactly how much more is saved going after the high interest, the 0%, or smallest to largest.

The biggest concern I have about the shell game of consolidating debt is the possibility of the credit lines not being closed, then maxing them out again for even more debt. So long as those lines are closed immediately after transferring the balance over, I'd have less heart burn over it.

There is an online tool which will calculate this for you. https://undebt.it/debt-snowball-calculator.php

[myrdale]

There is an online tool which will calculate this for you. https://undebt.it/debt-snowball-calculator.php

Petunia, that is actually pretty amazing. Thank you.