Please help me navigate the world of 0% cards!
January 7, 2013 8:28 AM   Subscribe

I want to transfer some of my credit card debt to a zero percent card. But which card? And how much? And is this really a good idea?

After a financially shitty December - but isn't everyone's? - I'm really more determined than ever to make a serious dent in my credit card debt. I have one moderate interest card and one high interest card with roughly the same balance. (~$2,300 on the lower interest card, ~2,400 on the higher interest card).

I have been looking into transferring at least some of that to a zero percent card. But how much? Which card? Argghhh!

I know that there are cards with no balance transfer fees, and there are cards with no penalty rates, but there are no cards with no penalty rates and no balance transfer fees. I'm torn between applying for the Chase Slate card (0% APR for 15 months, no balance transfer fee) and the Citi Simplicity card (0% APR for 18months, no late fees, no penalty rates, 3% balance transfer fee). The latter seems like a better choice, but a $100 balance transfer fee if I transfer $3,000 seems like a lot of money.

If I use the Slate card, I can pay off the higher interest card in 15 months paying $160/month. However, I would only be able to pay the minimum on the other card on top of that. If I use the Simplicity card, I can pay off more debt ($3,000) at $166/month, but I'll have spent $100 on a balance transfer, and that seems like a real chunk of change. (I can narrowly afford these monthly payments).

Advice? Warnings? I'm leaning toward the no balance transfer fee card, but if there's anything crucial that I'm missing, please let me know. This is all very confusing. My other get-out-of-debt scheme is egg donation (which I sort of want to do for other reasons), but that is probably on hold for right now.

I'm pretty confident I will qualify for at least one of these cards. When I last checked my credit score, it was in the mid-700's for whatever reason.

DISCLAIMER: No lectures from the MeFi Financial Shame Squad, please.
posted by ablazingsaddle to Work & Money (21 answers total) 6 users marked this as a favorite
 
I recommend to get the zero-transfer-fee card if you think you won't miss or be late on a payment. In the next 15 months, I think you will have an opportunity to do another free transfer card if you want, so you'll still get months 16-18.
posted by michaelh at 8:45 AM on January 7, 2013


1. You want to transfer the $ from the higher interest card.
2. What are the fees after the 0% intro period is up? If one of these cards has a lower APR at that point, it's the better option.
3. Once you transfer onto a 0% APR card, you then pay the minimum on that card.
4. In the meantime, you pay as much as you can on the card that still has interest.
5. Steps 3 and 4 pay off the debt faster.
6. Once the lower interest card is paid off, you then focus on paying off the 0% APR card.

A word on step 2 -- it's very likely that the card with the up-front 3% charge is going to have a lower APR after the intro period is up than the one that doesn't charge you a balance transfer fee. Look at the APR for each, and add 3% to the Citi card for the "real rate."
posted by DoubleLune at 8:48 AM on January 7, 2013 [2 favorites]


This is, at base, a math question. Will you save more or less than $100 over the course of the period in which you're making payments if you choose the card with no fee? Take into account the interest rate on the other card, as well as any interest you'll be paying on the remaining balance in months 16-18. I'm sure that someone will volunteer to actually do that math for you if you're willing to provide them with the actual numbers.

Is there a reason you think you'll need the no-penalty term? That is, do you have a good reason to think you'll miss payments or make them late?
posted by decathecting at 8:49 AM on January 7, 2013


There is information missing, such as the rates you are paying now, the APR on the new cards after the intro period expires, the credit line you think you will qualify for, the absolute highest monthly payment you can afford.

As a general piece of advice, I would advise that you push yourself. Don't settle for $160/month if you think you can squeeze it to $166 or even $175 or $200. If you really commit yourself to a larger amount, you are likely to find extra bits of money--selling stuff around the house, cutting a few dollars from monthly expenditures like cable/cell phones/utilities, picking up a dogwalking gig here or there, whatever.
posted by payoto at 8:54 AM on January 7, 2013


As a general piece of advice, I would advise that you push yourself. Don't settle for $160/month if you think you can squeeze it to $166 or even $175 or $200. If you really commit yourself to a larger amount, you are likely to find extra bits of money--selling stuff around the house, cutting a few dollars from monthly expenditures like cable/cell phones/utilities, picking up a dogwalking gig here or there, whatever.

I'm a young, low-paid professional in a creative field living in an expensive city. I also have unreliable employment so I need to have some sort of savings cushion. If I pay too much towards my credit card debt, I won't have any rainy day fund. And I need a rainy day fund because I'm going to get laid off in April and I'd like to be able to buy groceries and dog food.

Oh, and no lectures please.

3. Once you transfer onto a 0% APR card, you then pay the minimum on that card.

This makes sense, but I'd like the psychological motivation to just pay off the debt. Is that crazy?
posted by ablazingsaddle at 9:04 AM on January 7, 2013


If your current rates are excessively high you probably aren't going to qualify for the 0% cards. And if your rates aren't excessive you might want to do that math to see if the hassle of the switch is really worth it. Saving $200 over 15 months is $200 but you might decide it's not worth the hassle of making the switch. Pay the minimum on the lower rate card and pay extra on the higher rate card until it is paid off. Then put the what you were paying on both onto the one remaining card until it is paid off. The psychological boost from seeing one credit line consistently shrink may do you more good than the 0% cards will.

Not to mention no matter how well intentioned you are about this, having additional credit available is not always a good thing. The banks don't offer these cards because it helps consumers minimize their interest expenses. They offer then because in most cases, it maximizes the banks interest income.
posted by COD at 9:24 AM on January 7, 2013


"The psychological motivation to just pay off the debt" comes from paying off the highest-interest debt first and thereby paying the least interest possible.
posted by kindall at 9:24 AM on January 7, 2013 [3 favorites]


You may also be able to get the 3% transfer fee waived if you call the company and tell them that this fee is what is standing in the way of you choosing Citi over another company.
posted by blurker at 9:36 AM on January 7, 2013 [2 favorites]


Paying off the highest interest card first is the logical answer. People aren't logical, they are emotional. Some more than others. For some people, the key might be paying off the lowest balance card first, regardless of interest rates, because getting one out of the way provides motivation to continue. Also, most people are going to have similar rates across their credit card debt. If Chase thinks you are a bad risk and has you at 19%, it's very unlikely that BOA sees otherwise and has you at 7.99%. It's certainly possible if there is an older fixed rate card in the equation, but that seems unlikely given the OP's youth. So when you do the math the difference in interest paid may not be particularly significant, regardless of which card is paid off first.

And some people would lay awake at night stressed if they weren't minimizing their overall interest expense. However, paying it all off while spending a couple of hundred bucks on interest that wasn't absolutely necessary is better than not paying it off because you got frustrated when you weren't seeing progress up front.

The goal is to pay off the debt. Doing so while minimizing interest charges is ideal, but it is still secondary to just getting it paid off.
posted by COD at 9:41 AM on January 7, 2013


This makes sense, but I'd like the psychological motivation to just pay off the debt.

The idea is that you would pay off the card you're paying interest on as soon as possible.

So say you've worked out that you can pay $200/month total. Say the 0% APR card has a minimum payment of $25. You then use the remaining $175/month on the card that's accruing interest. At roughly $2300, you should be able to pay that off in a little over a year. Then you use the entire $200 to pay off the 0% APR card, which should take you another year. The psychological motivation that works for me is looking at how much I'm paying in interest, and working to reduce that. That may not work for you, but if it does, then paying down the higher interest card is the way to go.
posted by DoubleLune at 9:55 AM on January 7, 2013


Yeah, the point of a 0% card is that you are stopping the interest on that debt. That allows you to pay the minimum on that card without incurring any interest, thereby freeing up money you would otherwise be throwing away on interest to pay down debts that DO have interest.

Therefore, get the 0% Chase Slate card (which does not have a balance transfer fee), put as much of your credit card debt on that as possible, and pay the minimum on that while you pay the maximum amount you can on your other credit cards. When the 15 months pass, THEN start paying as much as you can on that card (unless you are able to retire all your other balances in under 15 months, in which case you would have started paying down the Slate before then).
posted by rabbitrabbit at 10:23 AM on January 7, 2013


Ok, doublelune and rabbitrabitt, you've convinced me.

I have one card that's at 12.29% APR, and one that's 24.99% APR. Guess which one I'll transfer?

I am a little worried about paying late - I've done it in the past - and penalty rates kind of scare me. I'm leaning toward the Citi Simplicity Card. I don't want to give myself a chance to fuck myself over even more with credit, you know?
posted by ablazingsaddle at 10:30 AM on January 7, 2013 [1 favorite]


If you're worried about paying late, see if you can set up an automatic monthly payment. My bank lets us choose to automatically pay the minimum, the balance, or a fixed sum of our choice.
posted by amarynth at 10:46 AM on January 7, 2013 [2 favorites]


Yeah, and also be aware that some companies will withdraw the 0% intro rate if you pay late, so make sure you pay on time!! Setting up a recurring payment is the best way to do this.
posted by rabbitrabbit at 10:51 AM on January 7, 2013


Yes, online payments are a lifesaver. I have all my bills set up on recurring payments. I also check as soon as I get a bill in the mail to make sure it's set up to pay online through my bank.

The other thing you should try to do (which can be hard if you don't have a set income every month) is to set aside the money to pay your bills at the beginning of the month. Then, come bill time, there is money to pay with.
posted by DoubleLune at 10:53 AM on January 7, 2013 [1 favorite]


You may have already done this, but if you haven't, look into what cards your local credit unions are offering. They will almost certainly give you a better rate. The one down the street from me is 4.9% for everyone with no balance transfer fees, no penalty for late payment and the same rate for cash advances. And no variable rate - that's the rate forever. There are even better deals around. Zero percent is often not the wisest choice money wise, and can really bite you. The big cards from the banks often have OK introductory offers, but when you actually use them end up being deal breakers. The banks are looking for ways to make money off you, whereas credit unions are not-for profit. Most are easy to join, hit me up if you want some help locating one with a good credit card offer that you're eligible for.
posted by stoneweaver at 11:12 AM on January 7, 2013


I am a little worried about paying late

Check the fine print. One late payment could immediately cancel the 0% introductory period, and you'll just end up with another high-rate card.

It may actually be smarter for you to forgo this switch and enter a payment plan through a Consumer Credit Counseling Service. That would be a way to get you a low rate on all your cards and a payment plan of something like 36-60 months to eliminate this debt. Trouble is your looming unemployment.
posted by dhartung at 11:31 AM on January 7, 2013


Check the fine print. One late payment could immediately cancel the 0% introductory period, and you'll just end up with another high-rate card.

The Citi Simplicity card has a very forgiving policy. I don't want to has it out here, but you can look it up if you'd like. But automatic payments seem like a better idea, so there's that.

It may actually be smarter for you to forgo this switch and enter a payment plan through a Consumer Credit Counseling Service. That would be a way to get you a low rate on all your cards and a payment plan of something like 36-60 months to eliminate this debt. Trouble is your looming unemployment.

Wait, what? I thought that was kind of a last resort thing. I also would really like to do this with as little hassle as possible. Do you have direct experience with a credit counseling service?
posted by ablazingsaddle at 11:42 AM on January 7, 2013


Don't do credit counseling unless you are literally trying to stave off going into collections/bankruptcy. You are correct that it is a last resort - partially because the non-scammy services are so hard to distinguish.
posted by stoneweaver at 12:53 PM on January 7, 2013 [1 favorite]


I'll disagree with the people saying that the psychological boost comes from paying off the highest-interest card first, in my case. When I finally got out of consumer debt five years ago, it came from paying off the smallest debt first. I only had one credit card, and owed more on it than I did on my car, but it had a higher interest rate than my auto loan, and I paid my car off first, then threw the car payment at the credit card.

Yes, in the long run I paid more in interest. But I paid it all off, which I wouldn't have done had I attempted to do it the least-expensive way--and hadn't achieved in ten years of Doing It The Right Way while being in serious credit-card debt--because the grinding reality of debt was doing a serious number to my psychological well-being, and getting rid of a discrete chunk (several months early, even!) was incredibly freeing.

Your mileage may vary, of course. My husband would have done it exactly opposite, because he gets satisfaction out of that.

(And my final student loan payment went out last week. FREE! FREE! FREEEEEEEE!)
posted by telophase at 7:21 PM on January 7, 2013


Do you have direct experience with a credit counseling service?

Yes.

Wait, what? I thought that was kind of a last resort thing.

You did say you were expecting to be unemployed. A CCCS counselor will be able to help you deal with a period of lower payments during your time without work. An initial consultation can also direct you toward assistance programs and other things to tide you over.
posted by dhartung at 10:50 PM on January 8, 2013


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