Opening up a new rewards credit card to take advantage of a 0% APR balance transfer is one of the best financial tricks out there. If you have high interest debt or need to purchase something expensive, but need time to pay it off, a 0% APR credit card balance transfer is a good idea.
A rewards credit card is a fantastic tool to help you achieve financial freedom if used properly. I’ve racked up hundreds of thousands of points to pay for free travel, free electronics, and statement credit. The last thing you want to do is let a credit card take advantage of you by not paying your bill in full each month.
In this article, I’d like to teach you how to do a 0% APR balance transfer with a credit card so you can gain some breathing room and save yourself some money. I used to do 0% APR credit card balance transfers all the time in my 20s before I started making a healthy income in finance.
How To Do A 0% Credit Card Balance Transfer
- Figure out the numbers
- Compare the best balance transfer credit cards
- Pay off the balance in full before the intro period is over
- Know all the details
- Apply for the most appropriate card
- Initiate your balance transfer
- Pay down debt and build credit
1) Figure Out The Numbers
Before making any financial decision, you must know the numbers. For a 0% APR balance transfer to work, you need to know:
- Your current credit card or other debt interest rate
- Your total debt balance
- How much of the debt you can transfer over to your 0% credit card
- The length of time you get to have the 0% APR credit card offer
- How much you’ll end up paying in interest over the year
- The amount you’ll end up saving in interest over the year
Let’s say you have $10,000 worth of debt on a high-interest credit card with a 20% APR.
In one year, $10,000 x .20 = $2,000 in interest alone! If you pay the minimum payment each month, it will take you years to pay off your credit card debt and lots of interest. That’s not a road you want to get stuck on.
If you transfer that balance to a 0% APR credit card instead, you can eliminate your $2,000 annual interest payment for a certain period of time.
0% APR Introductory Offers
Many rewards credit cards have 0% APR introductory offers for 12 – 15 months to lure you over. The best rewards credit cards are the ones with no annual fees and an introductory 0% APR offer. That way, you’re truly getting everything for free!
A card with a 0% APR offer for 12 months would make your monthly payment $833.333, whereas a card with an 15-month introductory period would mean your payment would drop down to a smaller amount of $666.70, plus you’d have three more months to pay it off.
It feels great to pay down debt without feeling like you’re running in place. Every single dollar is going towards paying down the principal balance.
There’s just one thing you need to know when you sign up to transfer your debt over to a new card: the balance transfer fee. Some cards have 0% balance transfer fees.
While some other cards might have a 3% balance transfer fee. Make sure you calculate what your total balance transfer fee would be if a card has one to make sure transferring your balance over is worth it.
2) Compare The Best Balance Transfer Credit Cards
There are over a hundred balance transfer credit cards. Lucky for you, I’ve spent hours reviewing them all to only highlight the best. Here is a review of some of my favorites.
The key things to compare are:
- The duration of getting a 0% APR – the longer the better
- The balance transfer fee
- The APR after the introductory period is over – the lower the better
- The sign-up bonus amount – often rewards credit cards will offer a certain amount of cash back after you spend a certain amount within a three month period
- Other rewards bonuses
- Cardholder protection and insurance
- Membership programs across various partnerships
Eventually, you will pay off your balance. And when you do, it’ll be nice to use your balance transfer credit card to get massive rewards that suit your lifestyle.
3) Pay Off Your Balance In Full Before The Intro Period Is Over
One of the key mistakes people make when taking advantage of a balance transfer is NOT paying off their entire balance in full before the introductory period is up. They think that if they just pay off the balance in full in the 13th month and not by the 12 month, for example, they’ll only have to pay interest on the balance for one month. Wrong!
If you do not pay off your entire credit card balance in full before the 0% APR rate expires, you are on the hook for paying the new APR interest on the balance for the entire introductory period!
For example, let’s say you transfer $10,000 to a balance transfer rewards credit card with no balance transfer fee. It has a 0% APR for 12 months, but a 25% APR after. If you don’t pay a penny towards your balance until the 13th month, you will have to pay $10,000 X 25% = $2,500 in credit card interest.
Don’t forget to pay off your balance before the intro period ends.
4) Know The Details
Besides figuring out the basic details so you can compare cards, realize that you might not get everything you think you will get.
For example, the Chase Freedom Unlimited card offers 1.5% cash back on spending, but not for balance transfers. You cannot double dip, sorry folks.
Another example is if you want to transfer balances between card families e.g. from a Chase Freedom Unlimited Card to a Chase Sapphire Reserve Card. You probably can’t. You’ll have to transfer to another credit card company, like Capital One. That’s fine, because Capital One also has an amazing selection of rewards cards to choose from.
5) Apply For The Appropriate Balance Transfer Card
Once you’ve done your due diligence on choosing the best balance transfer credit card to get, it’s time for you to apply for the appropriate card.
The appropriate card is the one the suites your lifestyle and financial needs. However, the appropriate card is also one that will accept you. The acceptance criteria is usually based on your credit score.
If you have a credit score above 690, you can usually get approved for the best cards. But if not, you should expected to be rejected by some that require high credit scores.
Even if you get rejected, it’s not the end of the world. Just apply to another one. You’ll eventually find a new credit card that has enough of what you’re looking for.
If you don’t have a strong credit score, take a look at the best credit cards for folks with bad credit. These cards are designed especially for people with low scores so your chance to get approved is high.
6) Transfer Your Balance
Once you’ve been approved for your new card, log onto your credit card account and fill out the online form to begin your balance transfer process. The entire process shouldn’t take more than a week.
You can also give your credit card company a call and ask for assistance. They will be more than happy to help take on your balance and start the process for you.
7) Start Paying Down Your Debt
Make it your #1 goal to pay off your balance by the time the 0% introductory period is over. Do not think for a second that because you now have 12 months or longer to pay off your debt, you can now wantonly spend more money on other things. If you do, you’ll fall into a terrible debt/spending cycle that will keep you from financial independence.
The simplest way to stay on track is to take your balance transfer and divide it by the introductory period. Pay that figure each month at a minimum. If you get a nice cash injection from a raise, a bonus, a promotion, or a side hustle, consider using some of your cash to pay down your debt.
Alternatively, the riskier, but best way to take full advantage of the 0% APR is to save that money up in a high interest online savings account and then pay the entire lump sum off the week before the introductory period is over.
Let’s say you transfer $12,000 with a 0% APR for 12 months. If you can save up $1,000 a month, instead of paying down the 0% APR debt, put the cash in an online savings account that pays 2%.
You’ll earn about $140 in interest income during the 12 months. Then you can pay down the $12,000 debt in full a week before the APR is to reset higher.
Transfer Your Balance Like An Expert
I hope this article has helped you best figure out how to transfer your balance to a 0% APR credit card like an expert. You’ve got to be methodical and organized for this to work in your favor.
When it does, it feels great to take advantage of a free loan while also building up your credit and paying off debt. After you get your debt paid off, make it your next priority to pay off any future debts in full every month to avoid paying any more unnecessary interest and fees.
Financial freedom stems from proper debt management, proactively saving on a consistent basis, and putting your money to work for you through investments that fit your risk tolerance and financial goals.
I hope you’ve enjoyed this article on how to benefit from the best balance transfer rewards cards available today. Happy transferring!
For further suggestions on saving money and growing wealth, check out my Top Financial Products page.
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