0% Interest CC for 6 Months

[Lindahfx]

Looking for people's opinions re. credit cards that offer 6 months at 0% interest for balance transfers. They charge a 2% fee of balances transferred. And unless you pay it all off in 6 months, it is then at 19.99% after.

Thoughts?

[creditcardfree]

Only do this if you can pay the balance in full during the 0% period. And only if the interest charged during that same time on the current card would be more than the 2% fee.

A better answer can be provided if you give balance and interest rate details.

[Petunia 100]

Here's a better offer. 0% for 15 months and no balance transfer fee.

https://creditcards.chase.com/credit-cards/chase-slate

[Lindahfx]

creditcardfree - If you are going from a 19.99% cc to this for 6 months and then again to 19.99% (assuming you can't pay it all off in 6 months), then the issue is the 2% transfer fee and whether the savings is worth it, right?

Petunia 100 - I'm in Canada and we don't have that offer... too bad.

[commoncentsmike]

Clearly it's not a bad financial move if you can easily pay it off, but consider this too. Once you do pay it off, you still have that credit card on your report now. Nothing horrible, but when people keep chasing those deals they end up with 10 different credit cards and that can be a hassle AND a drain on the credit score eventually.

[creditcardfree]

creditcardfree - If you are going from a 19.99% cc to this for 6 months and then again to 19.99% (assuming you can't pay it all off in 6 months), then the issue is the 2% transfer fee and whether the savings is worth it, right?

If you can't pay it off in 6 months and the interest rates are the same, then the 0% offer is going to give you a reprieve from paying any interest for 6 months and the cost of that is the 2% transfer fee.

Will you be paying debt off along the way?

I'm assuming you are not adding new charges to the card. Don't do the transfer if you are going to keeping adding charges. That means there is a spending problem and this 0% offer is not going to solve the problem.

[bjl584]

how much are you trying to transfer?

[Petunia 100]

Clearly it's not a bad financial move if you can easily pay it off, but consider this too. Once you do pay it off, you still have that credit card on your report now. Nothing horrible, but when people keep chasing those deals they end up with 10 different credit cards and that can be a hassle AND a drain on the credit score eventually.

You can close accounts as well as open them, you know.

[Petunia 100]

Petunia 100 - I'm in Canada and we don't have that offer... too bad.

Yes, that is too bad. Well, take what you can get. If your current offer will save you some money, take it.

[Lindahfx]

If the transfer is say $5,000 then the fee would be $100. Would the calculation of interest savings be:

assume $100 per month payment (2% of balance) @ 19.99% =

Pmt Int Princ Balance
1 83 17 4983
2 83 17 4966
3 83 17 4949
4 82 18 4931
5 82 18 4913
6 82 18 4895

= $495 interest

Versus

$100 per month payment at 0% interest = $600 to principal

Therefore savings would be $495-$100 (fee) = $395 overall savings

Have I calculated that right?

[disneysteve]

Have I calculated that right?

That looks right. So yes, you'd save about $395 on a $5,000 transfer.

If your credit is good enough to get the 0% deal, though, I would think you should be able to find some better financing that a 20% credit card. Have you looked into other options to refinance this debt? Perhaps a home equity loan or other form of personal loan?

[Jluke]

That math is scary.

You pay $600 but the principal only decreases by $105.

The only error I see is the $100 payment.

That needs to be higher. Otherwise switching to a 0% offer is a band aid to the real problem.

Post your budget and real numbers if you are comfortable doing so.

[Lindahfx]

Disneysteve - Yes, you are right... a different lending vehicle would be a better solution. But if someone doesn't have those options, I just wanted to make sure I had the numbers right.

Jluke - The $105 principal reduction is at the 19.99% rate only. But overall it is very scary, yes.

[Gailete]

If the transfer is say $5,000 then the fee would be $100. Would the calculation of interest savings be:

assume $100 per month payment (2% of balance) @ 19.99% =

Pmt Int Princ Balance
1 83 17 4983
2 83 17 4966
3 83 17 4949
4 82 18 4931
5 82 18 4913
6 82 18 4895

= $495 interest

Versus

$100 per month payment at 0% interest = $600 to principal

Therefore savings would be $495-$100 (fee) = $395 overall savings

Have I calculated that right?

No your math is very wrong if you are going to do this, not just $100 per month. If you take advantage of a zero percent card for 6 months, you need to be paying as much as possible each month to get that loan amount down. What you have to look at is what you are paying now on the card per month and if you can't get it all paid off in six months, have a viable place to transfer the amount remaining so you don't get stuck with the 20% interest at the end of 6 months.

This kind of loan gives you two things. Some breathing room and an opportunity that most of your monthly payment goes against the principal so more of the loan is getting paid off. If you are only planning on making minimum payments, this is hardly worth the fuss, especially if you are leaving another card with lower interest to take advantage of this. Also depending on when and how often you get paid, make payments every payday for as much as possible as that is a good habit to get into to drill away at the bills, and round up all payments even if only to the nearest dollar as that chips away at them too.

I've used those zero cards at times and paying off on one currently. They can be very helpful or hurtful depending on how you treat them. But you never want to make just the minimum payment. That is what that clever little box on the right side of your statement is all about. My loan that has some zero % charges said if I pay only the minimum it will take me 26 YEARS to pay it off (by which time I will probably be dead of old age) and then they give you another number and tell you if you pay a different amount it should take 3 years and how much you save in interest. Of course, each of those boxes are particular to each loan and how much it is for but look at them and pay attention. If you think all you will pay is $600 for those 6 months, I would take a pass. Just forgetting what is the last day that you have to pay it off, can be a very big surprise when you get your next statement for month 7.

[Petunia 100]

If the transfer is say $5,000 then the fee would be $100. Would the calculation of interest savings be:

assume $100 per month payment (2% of balance) @ 19.99% =

Pmt Int Princ Balance
1 83 17 4983
2 83 17 4966
3 83 17 4949
4 82 18 4931
5 82 18 4913
6 82 18 4895

= $495 interest

Versus

$100 per month payment at 0% interest = $600 to principal

Therefore savings would be $495-$100 (fee) = $395 overall savings

Have I calculated that right?

If you are paying 19.99% now, then (pretty much) yes.

(I say "pretty much" because you accrue interest daily on your credit card balance. That means exact number of days in the billing cycle and exact number of days between one posted payment to another impact the interest calculation. In short, the actual interest charges will vary a bit from what you have posted. But your numbers are a close approximation.)