How to Use a Credit Card to Pay Down Credit Card Debt

Many people know how to run up credit card debt. What most don’t know however, is how to run a debt balance down.

One route to paying off credit card debt is with a 0% APR balance transfer credit card account. While debt may not always be good, credit does not necessarily have to be bad. The key is how you use it. So let’s explore how using credit intelligently can help you be successful in credit card debt reduction.

Making a 0% APR Balance Transfer Work for You

Step one is to open a new credit card account that allows for transferring a balance with no interest fees on that balance for an extended period of time. Many offers range from six months to more than a year.

High interest rates often come with the territory when carrying a balance, which makes reducing credit card debt even harder. On the other hand, when a balance from a high-rate credit card is transferred to an introductory 0% APR card, it provides more breathing room to pay debt down more quickly while saving money on regular interest rate charges, which are temporarily put on hold. The goal now is to pay off as much of the debt as possible before the no interest fee period ends and 0% APR is replaced with a higher rate.

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A 0% APR Account Can Still Cost You

It is common for credit card issuers to charge a 3 to 5% balance transfer fee on the amount transferred1. That charge is often tacked onto the balance and not eligible for 0% APR1. Even though the fee is less than the rates on unpaid balances, be sure to compare (and understand) all costs involved with balance transfers before making the move.

While 0% APR may apply to the balance transfer amount, beware of making purchases with the new card. That 0% APR will not apply to them, but standard interest rate charges can be applied and add to your debt. Remember, the goal is debt reduction, so focus on saving and paying off, not buying and racking up more debt2.

Develop a Balance Transfer Payment Plan and Stick to It

Transferring balances on high-interest rate cards to 0% APR credit cards will only work with a proactive dedication to decreasing debt as quickly as possible. Stick to this plan to make the most of the transfer:

  • Pay the maximum amount you can every month.
  • Focus on paying off the 0% APR balance transfer amount first and avoid adding new interest debt accumulation on new purchases.
  • Eliminate the entire 0% APR balance transfer amount before the end of the introductory period. Having doubts? Consult a credit counselor for debt reduction guidance.
  • Keep your old credit card accounts active — just avoid running up new unpaid monthly balances.

If you are ready to save on interest payments and reduce credit card debt, a 0% APR balance transfer may be well worth considering.

Resources:

1.Wise Bread “When to Do a Balance Transfer to Pay Off Credit Card Debt”http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt

2.Wise Bread “6 Hidden Dangers of Credit Card Balance Transfers”http://www.wisebread.com/6-hidden-dangers-of-credit-card-balance-transfers

Legal Disclaimer: This site is for educational purposes and is not a substitute for professional advice. The material on this site is not intended to provide legal, investment, or financial advice and does not indicate the availability of any Discover product or service. It does not guarantee that Discover offers or endorses a product or service. For specific advice about your unique circumstances, you may wish to consult a qualified professional.

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