Are you currently struggling to keep up with your credit card minimum payments? Are you paying interest in the 14.99% to 24.99% (or higher) range?
You need to pay attention.
Imagine what dropping your interest rate down to 0% could do for your financial situation. That $5,000 balance that you’ve been chipping away at for months with no progress could be wiped out in 14 months if you really put your mind to it.
Don’t believe me? Let’s do some easy math.
A $5,000 balance at “only” 20% interest would you charge you a minimum payment of $133.33 per month (assuming your minimum payment covers interest plus 1% of your balance). At that rate it would take you a stunning 277 months (that’s more than 23 years!) to pay off the balance and you would pay over $7,700 in interest.
Last time I checked paying $12,700 for something that should have cost you $5,000 is not a good deal.
What is a good deal? Not paying interest on a big credit card balance so that you can pay it off faster. That’s the fast track to getting out of credit card debt.
What would happen if you could transfer that balance to a new credit card that would give you 0% interest on your balance? Wouldn’t you be able to pay that card off much faster?
Instead of paying $133.33 per month and never getting anywhere, you could apply all of your money toward the principal balance. In one year you could pay off $1,600 of your balance. If you really applied yourself you could pay off the entire balance by paying $416 per month during the 0% introductory period.
What company would be crazy enough to let you do this? Discover.
Discover More Credit Card
Discover is one of the premiere credit card brands in the world. The company regularly ranks well for customer service while offering great credit cards. (The company goes as far as to guarantee you will be speaking to a live human being within 60 seconds of calling customer service. No more frustrating phone tree!) They can be a bit more picky in terms of who they let have one of their credit cards, but once you’re in, it’s great.
If you apply now for a Discover® More Card you’ll receive these amazing perks:
- 0% APR on balance transfers. Have you decided to crush your credit card debt this year? Paying 20% interest makes it challenging to get rid of debt in one year. However, if you can drop your interest rate to 0% while being motivated, you’ve got a great chance to make a huge impact on your credit card debt. This card let’s you keep your 0% rate for 14 months before the interest rate goes back up to normal rates.
- 5% Cash Back. The Discover More credit card comes with rotating 5% cash back categories. The categories change quarterly and you’ll need to make sure your card moves over to the next category on time. The small hassle is worth it because getting 5% back on your purchases is a great way to be rewarded for your everyday shopping.
- 0% APR on purchases. Did we mention this is a cash back credit card? And that you won’t pay any interest on your purchases during the introductory 14 month period?
- No annual fee. You won’t pay an annual fee for having the honor of owning this card. Many cash back or rewards cards want you to pay a $30 to $100 fee just to have the privilege of using the card.
Let’s review: you get to drop your interest rate to zero, you don’t have to pay a fee for the privilege of transferring your balance to the card, they’re throwing 5% cash back at you on your normal spending, there is no annual fee, and you don’t pay any interest on your purchases either.
Downsides to Balance Transfer Credit Cards
As awesome as this type of deal is for the person dedicated to paying off their credit card debt, let us offer a word of caution. Getting into credit card debt is easy. Companies are willing to let you spend more than you earn, and you quickly find yourself in a financial hole. Once you’re in the hole you feel trapped and your payments are hardly making a dent in the principal.
Why would Discover offer so many great perks to you? They aren’t getting interest from your balance transfer or purchases. They aren’t getting an annual fee. Plus they’re giving you cash back. What’s in it for them?
Discover will make money on this deal in three ways:
- Hitting you with fees when you slip. This is the only real catch to using a balance transfer credit card. Your 0% introductory rate stays the same for 14 months for purchases and 14 months for balance transfers or until you slip up with a late or missed payment. Then interest charges and late fees hit you and ruin your plans of getting out of debt.
- Getting a balance transfer fee from you. You will pay 3% of the balance that your transfer to this card as a fee to Discover. If you keep the balance on the card for a full 14 months before paying it off, it’s like having a 3% interest rate.
- Getting paid by merchants when you use the card. Every time you swipe a credit card at a store, the store pays the credit card company a fee for processing the payment. This doesn’t cost you anything and happens with every credit card, so don’t worry about it.
- Getting paid interest after the introductory period. If you can’t pay off your balance in the introductory rate period your 0% will expire and you will be charged regular interest (ranging from 10.99% to 20.99%). This sounds bad, but you would have been paying this interest for the last 14 months if you hadn’t transferred your balance. Plus you can always find a new balance transfer card.
Want to fight these downsides? It’s pretty easy.
- Set up automatic payments. If you want to avoid those fees for slipping up, simply make sure you don’t slip up. The easiest way to do this is to set up automatic payments on the new credit card.
- Pay off as much of your balance as possible. Don’t want to have to hunt for a new balance transfer card after 14 months? Throw everything you’ve got at your balance during the introductory period. Paying off the balance is the easiest way to avoid interest.
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