If you’re struggling under the weight of high interest credit card debt, a balance transfer credit card might be exactly what you need. By transferring your high interest debts to a card with 0% interest, you can save money while paying down your debts at lightning fast speed. You can also look into getting a personal loan to see if that works as well.
This is not to say that you should use these cards to take out more debt. 0% APR cards should be a tool that can help people get out of debt faster, not accumulate larger amounts.
While most balance transfer credit cards offer 0% APR for a limited introductory period, others extend that benefit to purchases as well. That makes signing up for one of these offers a smart idea for anyone who needs an affordable line of credit to remodel their home or make a large purchase. By signing up for a card that offers 0% APR for anywhere from 12 – 21 months, you can secure your own “short-term” loan that is both convenient and interest-free.
Best 0% APR and Balance Transfer Credit Cards for 2017
This page includes the top 0% APR balance transfer credit cards currently available, as well as details that make each offer unique. Before we dig in, take a look at our top 0% APR balance transfer credit cards for 2016:
- Discover it® – Double Cash Back Your First Year
- Chase Slate®
- Citi® Diamond Preferred® Card
- Chase Freedom®
- Blue Cash Preferred® Card from American Express
Discover it®: Double Cash Back Your First Year
If you want to pay down debt and earn rewards at the same time, the Discover it® card offers one of the best opportunities out there. Not only do you get 0% APR on balance transfers for a full 18 months, but you also earn a minimum of 1 point per dollar spent on all of your purchases – plus double your miles after the first year!
The Discover it® card also offers 5% cash back in categories that rotate every quarter, which seriously improves your ability to rack up points quickly! Best of all, there is no annual fee so you can pay down debt and earn rewards without paying for the privilege. Here are some additional details:
- No annual fee
- 0% APR on balance transfers for 18 months
- Balance transfer fee equal to 3% of your transferred balance
- Track your FICO score for free online
Chase Slate®: Best All-Around Option
Whether you want to transfer high interest balances or secure an affordable line of credit for a large upcoming expense, the Chase Slate card® offers the best of both worlds. For starters, this card is the only card on the market that charges zero balance transfer fees for the first 60 days, plus a 15 full months at 0% APR. This offer extends to purchases as well, making this the perfect card to save money as you pay down debt or make a large purchase.
The only caveat to consider is the fact that you cannot transfer balances from other Chase cards to your new Chase Slate®. Here are some additional details to consider before you sign up and start paying down your debts for good:
- 0% APR on purchases and balance transfers for 15 months
- No balance transfer fee for the first 60 days
- No annual fee
- Free Monthly FICO score for cardholders
Citi® Diamond Preferred® Card: Longest 0% APR Period
The Citi® Diamond Preferred® Card offers the longest repayment period among 0% APR and balance transfer credit cards on the market – a full 21 months with 0% APR. That’s almost two full years with no interest you can utilize to pay down debt faster and save money in the process.
While this card does charge a balance transfer fee of 3% of your total balance or $5, whichever is greater, it offers the longest 0% APR introductory period on the market. Best of all, you can score 0% APR for a full 21 months without paying an annual fee for the privilege.
And since the 0% APR is good on purchases as well, this card is a no-brainer if you plan to remodel your home or finance a large expense you want to repay over time. Here are some more details to consider:
- No annual fee
- 0% APR on balance transfers and purchases for a full 21 months
- 0% liability on unauthorized purchases
- APR readjusts 12.24 % -22.24% based on creditworthiness after introductory period
Chase Freedom®: Best Perks with No Annual Fee
The Chase Freedom® is one of the most popular credit cards on the market, and for good reason. Not only does it offer 0% APR on purchases and balance transfers for a full 15 months, but it also offers a signup bonus and excellent ongoing rewards – and all with no annual fee.
You’ll earn a signup bonus worth $150 if you can use the card for at least $500 in purchases within the first 90 days, plus 1 point per dollar spent on all purchases and 5X points in categories that rotate every quarter, making it one of our best cashback rewards cards. Redeem your points for cash back, gift cards, or travel, and all while taking advantage of 0% APR to pay down your debts as quickly as possible. If your goal is to get the best airline credit card for rewards, this is a great pick as well. More details:
- 0% APR on purchases and balance transfers for 15 months
- No annual fee
- Earn $150 after you spend $500 on the card within the first 90 days
Blue Cash Preferred® Card from American Express: Best Ongoing Rewards
The Blue Cash Preferred® Card from American Express is another great option for anyone who wants to earn rewards while paying down debt at 0% APR. This card’s current offer includes 0% APR on balance transfers for the first 15 months, plus a $150 signup bonus after you spend $1,000 on the card within 90 days.
In addition to the signup bonus, you’ll earn 6% back on your first $6,000 in grocery spending each year, plus 3% back at gas stations, and 1% back on all other purchases. I have seen several entrepreneurs that drive for their business rely on this card as their business credit card because of the gas rewards. This card does charge a $75 annual fee, but the signup bonus alone more than covers it. Before you move forward, consider these other important details:
- 0% APR on purchases and balance transfers for 15 months
- Earn 6% on your first $6,000 spent at grocery stores annually, plus 3% back at gas stations and 1% back on all other purchases
- $75 annual fee
Getting the Most Out of Your 0% APR or Balance Transfer Credit Card
So, you’ve signed up for one of the best balance transfer or 0% APR credit cards on the market. Now what?
To get the most of your card, you’ll want to come up with a long-term strategy for its use. Most of the time, that means creating a plan that will help you maximize your card’s benefits while minimizing any expenses you pay out-of-pocket. Here are some tips that can help.
If you’re taking advantage of a 0% APR balance transfer offer…
#1 Watch the fees.
Many balance transfer credit card offers will have a fee of 3%-6% to make the transfer. If you are dealing with a 20% APR, paying this fee may not be a bad decision. But with creditors finally letting up a bit on their offers, there is a good chance that you can get a transfer with no fees if you have a good credit score.
Before you transfer a balance, make sure you understand any fees involved. Also make sure to run the numbers to figure out how much a balance transfer will save you. If the fees outweigh the benefit, you may be better off pursuing a different strategy.
#2 Create a plan to become debt-free during your card’s 0% APR introductory period.
If you signed up for one of the cards listed above, you’ll have at least 15 months to pay your balance down at 0% APR before your interest rate readjusts. To figure out how much you need to pay each month to make that happen, take your total balance and divide it by the number of months included in your introductory offer.
Let’s say you owe $5,000 total and have 15 months at 0% APR to pay it down. You would need to pay $334 per month to pay your debt in-full before your card starts charging you interest.
Example: ($5,000/15 months = $334)
If you're worried you won't be able to pull this off, you may want to think twice before opening yet another credit card account.
#3 Don’t use credit as an excuse to overspend.
If you choose a card with 0% APR on purchases, you might be tempted to spend more than you can afford. Don’t let that happen! To avoid getting into more debt, only use your card for purchases you plan to pay off right away. If you need to stash your card away in a sock drawer until you’re debt-free, so be it. Don’t let the allure of cheap and easy credit cause you to dig a deeper hole than you had to begin with.
#4 Once you’re debt-free, dedicate your life to keeping it that way.
Once you transfer a balance to a 0% APR card and pay off your debts, you might be tempted to borrow money again. No matter what, you shouldn’t let that happen! Instead, you should create a monthly budget you can stick to and live well below your means. Enjoy being debt-free and all that means for your family instead of falling back into old habits.
If you’re taking advantage of a 0% APR offer in order to finance a large purchase….
#1 Take your introductory period into account before you start putting purchases on your card.
If you’re taking advantage of 0% APR in order to make a large purchase or take on a huge project such as a home remodel, you’ll want to take your card’s introductory APR period into account. If you have 18 months at 0% APR, for example, you’ll want to create a spending and repayment plan that will help you avoid paying interest in the long run.
You should also consider the type of card you are getting. For instance, if you are using the card to finance a vacation, you should really look at a travel rewards card that will give you a good percentage back on all your travel. This way, not only are you financing at a low rate, but you can also take advantage of the rewards (some of which will also let you pay down the balance of the card).
#2 Only borrow what you can afford to repay while you’re at 0% APR.
Just like with a balance transfer, you should create a repayment plan that lets you take advantage of your card’s full 0% APR introductory period while helping you avoid interest. If you plan to charge a $10,000 home remodel, for example, and have 15 months at 0% APR to pay it back, you’ll need to pay $667 per month to make that happen.
Example: ($10,000/15 months = $666.66)
If you're worried you won't be able to afford it, that's a sure sign you probably can't. Don't overextend yourself if you can avoid it. While balance transfer cards can be useful, there are times when it's smarter to save up the cash instead of using one of these offers.
#3 Don’t get hooked on cheap and easy credit.
It’s easy to grow accustomed to charging all of your expenses, but you can do some serious damage if you let it become a habit! If you want to take advantage of your card’s 0% APR introductory offer without getting into trouble, use your card sparingly and only for planned purchases you know you can pay off right away.
7 Questions to Determine if You’re Ready for a Balance Transfer Card
Taking advantage of a balance transfer is a great way to pay off debt fast while avoiding the high interest rates charged by most cards. However, balance transfer credit cards aren’t the best solution for everyone. Here are 7 questions you should consider to help determine if a balance transfer card is right for you.
Question #1: Do You Have High-Interest Debt?
If you’re stuck with a pile of high-interest credit card debt that you think you can pay off quickly, using one of the best balance transfer credit cards is a good option to help you save. Many balance transfer cards offer an introductory 0% APR, which makes transferring those high-interest balances very attractive. Because there’s no interest accruing, your payments will be lower – which also means you’ll be able to pay off your balances faster.
Those attractive 0% introductory offers might have you wondering if you should transfer other types of debt to the card as well. Before you do, consider your options carefully. Remember, introductory rates don’t last forever. If you can’t pay the debt off before the introductory rate expires, transferring other debt to these types of cards is usually a bad idea.
Question #2: Why are You Considering a Balance Transfer?
It’s tempting to use balance transfer cards to create some extra breathing room with your monthly budget. However, that is probably the worst possible reason to use a balance transfer credit card. If you’re struggling to meet your minimum payments every month, you don’t have an interest rate problem; you have a debt problem. While a balance transfer card can be a part of the plan, it is not a long-term solution for someone in this position.
For the best results, use a balance transfer card with a specific and clear payoff goal in mind. Use the card to eliminate interest costs, then use the savings (and more) to pay off your debt quickly.
Question #3: What is the Introductory APR and How Long Does it Last?
While almost all credit cards offer a balance transfer option, the best balance transfer cards offer an introductory 0% APR offer. In most cases, it doesn’t make sense to transfer balances to other cards that don’t offer this option. With that said, introductory offers vary even between the best cards.
Generally speaking, the best cards usually offer an intro APR that lasts between 12 and 21 months. Once the introductory period expires, interest rates will adjust somewhere into the high teen or low twenty percent range. Make sure you know how long your intro rate will last and what your card will adjust to prior to transferring your balances.
Question #4: Is There a Balance Transfer Fee?
Even though you’ll save money on interest charges, most balance transfer cards employ a balance transfer fee ranging from 3 to 6% of the balance transferred. (The exception is the Chase Slate® which offers “no balance transfer fees” within the first 60 days of opening your account.) So, if you’re transferring $10,000 in bills, you’ve immediately added an extra $300-$600 worth of debt to your total balance. This fee may be nominal compared to the 20% interest rate on your other credit card, but it’s still something to keep an eye on.
Prior to choosing a good balance transfer card, determine if the balance transfer fee is even worth it. If you have the money, it might make sense to pay off your card immediately rather than get whacked with an additional fee. Regardless, you should know how much the fee is and factor it into your debt payoff plan for the best results.
Question #5: Have You Committed to Paying Off the Card Before the APR Adjusts?
Before you’re ready to use a balance transfer credit card, you should commit to paying off the balance before it adjusts. If not, you’re playing with fire. Don’t use it as an excuse to rack up more debt, and prepare to make payments above the minimum so you can get ahead. Use the money you’re saving on interest payments (plus some) to pay the balance off prior to the interest rate adjusting. Doing so can help you pay off your debt faster while helping you save on interest payments.
Have a clear plan for how much you’ll pay on the card each month. As stated above, the introductory 0% APRs offered by the best balance transfer cards are available for a limited time only. Planning how you’ll pay off the balance helps ensure that you’ll have the card paid off before the rate adjusts at the end of the introductory period.
Question #6: Do You Have Other Debt on the Card or With the Issuer?
If you already have a great balance transfer credit card in your wallet, you might want to transfer your existing balances to that card. When doing so, keep in mind that your payments will be split up according to interest rate. As required by the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009, when a card has balances with differing interest rates, the amount of the minimum payment goes toward the balance with the lowest rate. Any payment over the minimum balance is applied toward the balance with the highest rate. Also, keep in mind that you are usually unable to transfer balances between the same card issuer (Chase, Citi, Discover, American Express, etc.) and secure the publicly available 0% APR rate.
For new accounts, know that most of the best balance transfer cards offer the same 0% introductory rate for both balance transfers and purchases. Although there is nothing wrong with using a new card for both balance transfers and purchases, you should be extremely careful and only use this option in a way that does not accrue new debt. Be sure that you can pay off the entire balance of both your purchases and balance transfers prior to the rate adjustment. If not, you’ll only fall further behind on your payments.
Question #7: What is Your Credit Score?
In order to get the best 0% balance transfer card offers, you first need to be eligible. The best offers usually are available only to those who have the best credit scores. Generally speaking, you’ll need good to excellent credit (scores above 700) to qualify.
Transferring balances from one card to another can actually help improve your credit score, provided you leave the old account open. Although you may take a small hit for a new credit inquiry, you’ll improve your credit utilization ratio (the amount of credit available compared to how much you use). However, you’ll want to remember that transferring balances usually comes with a fee. Thus, transferring balances on a regular basis should be avoided at all costs.
More from GFC, Below
How Much Can You Save With a Balance Transfer Card?
One of the biggest benefits of using the best balance transfer cards is that they help you save money on interest payments. When transferring high-interest balances to a card with an introductory 0% APR, you can reduce the total amount of your minimum payments while using the money you save to pay down your debt faster. Let’s take a look.
Example #1 – Making Minimum Payments
Let’s assume you’re considering transferring your debt to a card with an introductory 0% APR offer that lasts 15 months. Your current debt of $5,000 is on a card which charges an 18.9% APR and requires a minimum payment of 2% of your balance. As such, your average monthly payment over those 15 months would be about $97/month, or about $1,455 in total. Unfortunately, only about $300 of that would apply toward the principal of your balance. In other words, you’ll still owe about $4,690 on the balance after 15 months. At this rate, you’ll pay about $15,125 in interest over the course of a whopping 35 ½ years!
When you transfer that $5,000 balance to a 0% balance transfer card with no balance transfer fees, you’ll save time and money. By making just the minimum payment, you’ll knock off about $1,307 in principle over the first 15 months. That leaves you with a balance of $3,693. If you do no more, let the rate adjust to 18.9% on the remaining balance, and make only minimum payments going forward, you’ll save about $4,844 and 6 years on the life of your loan. You’ll still end up paying $10,281 in interest over the course of 29.5 years if you go that route, however, so it definitely isn’t ideal.
Example #2 – Making More than Minimum Payments
The best way to take advantage of a 0% APR balance transfer card is to make payments above the minimum. That way, you can knock out the debt faster AND save money on interest!
Let’s assume you’ve decided to destroy your debt fast and pay $333.33 toward your $5,000 debt each month. Using the same 18.9% card cited above, you’ll get the follow results:
Monthly Payment: $333.33
Total Time to Pay Off: 18 Months
Total Interest Paid: $749
By making extra payments, you’ve saved $14,376 in interest payments and 34 years on your debt compared to Example #1! Obviously, paying over the minimum makes a huge difference.
Even better, here’s what happens if you use the same monthly payment but transfer your debt to a card like the Chase Slate®, which has an introductory 0% APR and no balance transfer fees:
APR: 0% (for 15 months)
Monthly Payment: $333.33
Total Time to Pay Off: 15 Months
Total Interest Paid: $0
Just by transferring your balance, you’ve saved an additional $749 and 3 months! That’s real money that you can use for your other savings goals. Even if the card has a balance transfer fee of 3% (which equals $150 in this case), you’ll still save a total of $599! Wouldn’t you like to save 600 bucks just for transferring your balance to a new card?
How to Select the Right Balance Credit Card for Your Needs
Now that you know some strategies for using 0% APR offers and pitfalls to avoid, it's time to find the perfect card and apply. While all the cards we list here are good ones, it's possible you'd benefit more from one card than another. Here are a few steps that can help you decide which card to try:
#1: Figure out how much debt you have.
Before you can dig yourself out of debt, it's crucial to know exactly how much you owe. The best way to do this is to get out all of your credit cards and bank statements, then tally it all up. While the total number may shock you, confronting it is the only way to create a real plan to become debt-free.
Remember to add up all debts that could potentially be transferred to your new balance transfer credit card. This includes not only credit card bills , but personal loans, too. The more high interest debts you can transfer, the more money you can save. So add it all up, then get ready for the next step.
#2: Determine how much time you need to pay it off.
Once you know how much you owe, you can create a feasible plan to pay it off. A lot of times, 12- 21 months won't be nearly enough. If you have $40,000 in credit card debt, for example, you would need to pay more than $1,900 per month to pay it off in 21 months!
The best you can do is figure out a way to pay off as much debt as possible as quickly as you can. You may not pay it all off before your APR resets, but you should strive to do your best. Also remember that balance transfers offers are not a one-time deal. If you pay off your debts at 0% APR with one card for 21 months, you can always transfer balances to another 0% card once your time is up.
#3: Compare balance transfer offers, including introductory offers, fees, and rewards.
Here's where things get real. Now that you know how much you owe, you should compare offers to find the best deal. As we mentioned already, one card on this list doesn't charge a balance transfer fee but only offers 0% APR for 15 months. If you can pay off your debts within 15 months, this card will almost always be the best deal.
If you need more than 15 months, you should strive to choose a card with the longest 0% APR offer possible. If you can get 21 months, for example, you'll have nearly two years to pay off your debts.
Also consider whether or not it's important for you to earn rewards. If your main goal is getting out of debt, rewards should really be an afterthought. Still, it's worth considering whether you'll want to earn cash back once you're debt-free.
#4: Decide if balance transfer fees are worth it.
The biggest factor to consider with any of these offers is the balance transfer fee. Most cards charge somewhere between 3-6% of your balance to take advantage. If you owe $10,000 in credit card debt, that means you'll fork over $300 – $600 in fees right away. When you're already in debt, that's a lot.
But it's also important to remember how much you'll save. If you're paying 18% interest on that same $10,000 balance and making a minimum payment of $400, it will take you a minimum of 13 years and 6 months to pay it off. During that time, you'll pay total interest of $5,873.50.
When you think of it that way, a $300 or $600 upfront fee doesn't sound that bad. Either way, you should run the numbers so you know your efforts will be worth it.
#5: Choose the right card for your needs.
Now that you've compared offers and made your peace with any fees you need to pay, you can be confident in your decision. Make sure to choose a card that offers the right combination of benefits and rewards for your needs. If your main goal is getting out of debt, focus on the length of the offer. If you want rewards, it's okay to consider a card's rewards program, too.
There's no right or wrong way to choose a balance transfer card, but you can optimize your efforts by considering all of the factors outlined in this post. Remember, your main goal is building a debt-free and prosperous life for your family. As you choose a card, try to keep that goal in mind.
5 Steps to Take After Completing a Balance Transfer
Now that you’ve made the decision to use a balance transfer card to get ahead, your job isn’t over. There’s still plenty of work to be done! To make the most out of your introductory period, be sure to complete the following 6 tasks:
Step 1: Decide How Much You’re Going to Pay and Stick to It
Using a balance transfer offer that comes with zero percent interest is a great way to save money and get ahead quickly. But remember, those introductory offers don’t last forever. Use that time to make the biggest dent possible in your principal balance instead, and then you'll really get ahead.
Determine exactly what your payment needs to be in order pay off your balance during the intro period. This simple formula should help you out:
Total Balance + Balance Transfer Fees / Number of Months for Intro APR = Monthly Payment Needed
If you’re transferring $7,000 to a card with an 18-month 0% APR and a 3% balance transfer fee, you’ll need to pay $400.56 a month to pay it off before the rate adjusts ($7,000+$210/18 months=$400.56 per month). If you want to pay it off faster, simply pay more each month. Decide what your payment plan will be, then stick to it!
Step #2: Press Pause on Your Other Debt
Making the most of your balance transfer card means paying it off before the rate readjusts. To do that, it helps to focus on one debt at a time.
If you’re strapped for cash and need some extra money to make overpayments on your new card, press the pause button on your other debts. Don’t stop paying them entirely (that would be baaaaad), but make only minimum payments. Use all available funds to pay off your transferred balances faster. When you have them knocked out, pay extra toward the rest of your debts, or consider moving them to a balance transfer card as well.
Step #3: Get on a Budget and Track Your Spending
To determine how much you can afford to pay each month, think in terms of your overall monthly financial plan. If you haven’t done so already, it’s time to start a budget.
Starting a budget doesn’t have to be painful or scary. All it means is that you’re creating a monthly plan for your income and expenses. Simply add up the amount of income you’ll make during the month, then spread it around to your bills until you reach zero. Anything you have left over is money you can use to pay down debt faster.
After that, you need to track the actual amount of money you spend. Doing so gives you a clear picture what you’re actually spending, helping you to stay on budget. Check in with your budget once a week to ensure that you’re sticking with the plan.
Step #4: “Just Say No” to More Debt
Using a good balance transfer card is a great way to pay off debt quickly, but it won’t work if you continue racking up debt. Stop using debt and credit to fund your lifestyle. Instead, only buy things that you have the cash to pay for. This will help you avoid overspending and put you on a solid financial path.
It’s crucial that you change your mindset about debt and that you stop using credit immediately. When opening a balance transfer card, it can be tempting to use it to buy more stuff you can’t afford. Avoid this at all costs as it will only hurt your progress. Once you’ve transferred your balances, cut up your new card so you can’t add to the debt you already have.
Step #5: Consider Keeping Your Old Account Open
Even though you might cut up your old cards to avoid temptation, that doesn’t mean you should close the accounts. Doing so could have a negative impact on your credit score.
Your length of credit history accounts for 15% of your total credit score. Credit utilization (the amount of credit you have available versus the amount you are using) accounts for 30%. By closing old accounts, you’re not only affecting your credit history, you’re also negatively impacting your utilization score.
Cutting up those old cards is still good practice, especially if you’re tempted to use them. However, you should consider leaving those accounts open and unused. This is especially true if you are in the process of trying to improve your credit or may be using credit for a large purchase (like a house) in the near future.
Never Get Into Debt Again with These 5 Tips
Digging yourself into debt can be disastrous for your finances. When you owe money, you constantly have to find ways to pay down your debt. Part of every paycheck is spoken for, making it hard to save and reach your financial goals.
Beyond the initial heartache and overwhelming stress debt causes, debt is downright deceptive. Over time, debt tricks you into thinking you can afford to buy more than you really can. Worse, debt dulls the pain of each purchase so you barely notice it at all…until you get the bill, of course. You may even forget how much you spent, leading to blown budgets and serious financial consequences.
When you continue using debt to buy more than you can truly afford, more and more of your money is gone. Sure, it may only seem like $20 here and $15 there, but all of those little debts add up. Sooner or later, you find out you're no longer in control of your finances – your creditors are.
Getting out of debt (and staying out) can have a huge impact on your life. Most importantly, paying off debt frees up money so you can spend on the things that you really want. Becoming debt-free also helps you avoid the stress of living paycheck to paycheck. Most of all, it means you have more disposable income to save for your goals and your future.
You landed on this page because you want to pay off your debts once and for all, right? While a balance transfer credit card can definitely help in that respect, you need to change your attitude towards debt and borrowing as well. Here are 5 tips that can help you stay out of debt for the long haul.
Tip #1: Create a monthly budget.
One of the best and easiest ways to stay out of debt is to start using a monthly budget. While that might not sound ideal, a budget is the most important component of any debt-free lifestyle.
The problem is, many people can't stand the idea of using a budget or having any restrictions on their spending. Feelings of deprivation and shackled thoughts race through their mind, and they give up before they even get started.
To break this cycle, you have to change your mindset. Instead of seeing your budget as the boss, you have to become the boss of your budget – and your money.
The reality is, using a budget is the best way to have money for the things you actually want. A budget is a plan to use your money efficiently, so you have money leftover for the important stuff. Learning to budget helps prioritize your spending so you can do what you want – without the dire financial consequences, of course. Maybe you enjoy traveling, or perhaps going to concerts is more your style. Whatever you want in life, the key to affording it is putting it in your budget. When you budget for what you want, you are intentionally setting aside money for the things that really matter to you – instead of unintentionally wasting it on things that don’t.
Creating a budget isn’t hard, and it doesn’t have to be complicated. To get started, use a simple sheet of paper to track the money you have coming in and going out each month month. Make sure that your expenses don’t exceed your income, and you’ve created a budget. See? That wasn’t so bad, right?
Tip #2: Only charge purchases you can afford to pay off right away.
One big reason people get into serious credit card debt is because they use their cards to overspend. That shouldn’t be a big surprise. Access to credit makes it easy to run up huge bills, and many families fall into this trip without realizing it. Often, we charge something on our cards and forget we actually have to pay that bill back.
If you’re going to use credit cards, you need to do it responsibly. When you don’t, you get into trouble.
A great way to avoid credit card debt is to use your cards only when you have the cash for the purchase. In other words, don’t use your card to buy anything that you can’t pay off right away. Far too many people look at their cards like a short-term loan – which they are. The problem is, credit cards are very expensive loans. To avoid debt and huge interest charges, don’t buy with a card unless you could make the same purchase with cash.
On a similar note, make sure to pay off your credit card balance in full every month. Don’t let your balance sit there accruing interest. Pay it off and keep debt out of your life.
Finally, if you are using a rewards or cash back card, don’t chase points by overspending. Only use your rewards credit card to make purchases you would have made anyway. Remember, the goal of pursuing credit card rewards is saving money – not wasting it.
Tip #3: Build an emergency fund.
Unfortunately, most Americans live extremely close to the cuff when it comes to financial matters. According to a 2016 Bankrate study, about 63% of Americans have less than $500 saved to handle an emergency. It’s no wonder so many people find themselves struggling with debt.
When you live without a buffer, every unexpected expense creates a budget crisis. And, if you don’t have enough money to cover the expense, chances are good that you’ll turn to debt to fix the problem.
Having an emergency fund can help smooth out the unexpected bumps in the road. Emergency funds are great because they do a few things. First, they help you cover unexpected expenses. Second, by having the money saved for emergencies you won’t go “off budget.” This keeps you on track and helps avoid giving up on budgeting completely. Finally, an emergency fund reduces stress. It helps you sleep at night, knowing you can handle any unexpected expenses thrown your way.
To build your first emergency fund, start by saving a little bit of money each month. At first, try to save at least $1,000. Eventually, work on building your emergency fund big enough to cover 3-6 months worth of expenses. Keeping this money on hand gives you a big enough cushion to handle almost any financial emergency.
Tip #4: Skip credit if you can't handle it.
If you don’t think you can stay out of debt while using credit cards on a regular basis, try stashing them away for emergency use only. That way, you can get to them if needed but you aren’t tempted to overspend at the drop of a hat. Keeping them out of your wallet and away from your sight might help you avoid the temptation to overspend.
Instead of using credit on a whim, you'll build the habit of using cash or debit for your purchases. You won't earn credit card rewards this way, but you can stay out of debt fairly easily if you avoid it.
Remember, not everyone can handle credit and avoid debt in the long run. Some people just aren't cut out for it, and that's perfectly okay. There's nothing wrong with avoiding credit cards because you're tired of living with debt. In fact, it takes a strong and wise person to admit credit is a problem.
Tip #5: Cut your expenses.
Cutting your expenses is a great way to reduce your monthly outlay, build a savings buffer, and keep your family out of debt over the long haul.
Earlier, we talked about how most people live far too close to the edge of a financial cliff. Most of the time, this is the result of spending too much of one's income. Far too many people live beyond their means, constantly buying what they want, when they want it, and without any regard to how it affects their finances.
Obviously, spending more than you make is a recipe for disaster – and a dangerous prospect. Spending too much leads to reduced savings and an inability to cover unexpected costs. Then, when something goes wrong, you have nothing to fall back on.
Rather than succumbing to every last desire, learn to spend with purpose. Just because you can buy something doesn’t mean you should. You need to decide whether each purchase is a want or a need. Then, determine if that item or experience is worth it to you. Finally, make sure you planned for everything you buy in your budget. If it’s not there and you don’t have the cash to pay for it, you probably can’t afford it.
More than anything, you need to act your wage. You can’t consistently spend more than you make. If you don’t have the money to cover what you want, you can’t afford it.
To get the most out of your 0% APR offer, you should do your best to avoid the pitfalls that tend to plague people who rely on credit. For the most part, that means only using credit for purchases you can pay off right away, or in this case, during your card’s introductory 0% APR period. Second of all, even though you are getting a deal signing up for one of the best credit cards, you should learn to use credit as a tool to improve your finances and not as a crutch that pulls you deeper into debt over time.
The best 0% APR and balance transfer credit cards can serve as a valuable tool in anyone's financial tool chest, but only if they are used wisely.