Transferring high interest balances to a credit card with a 0% APR promotional rate can help you get out of debt faster because your transferred balance doesn’t incur interest charges during the promotional period.
The money you save by avoiding those interest charges can be used instead to tackle your outstanding balance and help you pay down your debt faster.
After you compare balance transfer offers and find the one you want, you’ll need to determine how much to transfer. Here’s one simple approach you can follow to reduce debt:
- Take the number of months in your 0% APR promotional period
- Subtract one from that number
- Figure out what you can pay consistently every month towards debt repayment
- Multiply b) by c). This is the total amount you should be able to pay off by the time your promotional offer ends.
For example, if you can afford $100 per month towards debt repayment, and your new credit card has a 12-month 0% APR on balance transfers, the transfer amount would work out as $100 x 11 or $1,100.
You subtract one in the second step above to cover any applicable balance transfer fee, should you choose a card that charges one, or as an extra payment cushion. If you use the extra payment cushion, make sure you cover your minimum due that month to avoid potentially losing your promotional offer.
In some cases, you may need to transfer a larger amount than the one obtained using the above method. In that case, check out our Shed Debt Faster guide, where you’ll learn how to manage larger transfers.