The following is a post from Grayson from Debt Roundup. Check out his sweet blog after reading how he gamed the credit card companies. Nice work, Grayson! Now, just need to finish up these Schedule E’s….
When you grab the shovel and start digging your way out of $50,000 worth of credit card debt, you will do anything that you see fit in order to minimize the process. As I starred at all of those greedy, plastic cards with my name on them, I decided I would use the cards to my advantage. Yes, I did use credit to run my way through college and to start an online e-commerce business, but why not try to use them to help me? This is when I decided to lace up my shoes and play the credit card balance transfer game.
For those of you that don’t know what the balance transfer game is, then here is a quick and dirty breakdown. You take a credit card that has a balance with a high interest rate and transfer it to a lower interest credit card. This saves you a lot of money in the long run if done correctly. It is a pretty easy game to play and here are the rules.
- List all of your credit cards and interest rates in order of highest to lowest APR.
- List your available credit on each card.
- Ask your credit card provider for a balance transfer promotion.
- If nothing available, then open up a new balance transfer credit card.
- Transfer your highest APR credit card balance onto your balance transfer card.
- Pay off your balance transfer card before the promotion period ends.
These rules are not really complicated and can be pretty easy to get a handle of. When I played this game, I had a credit card that had a good amount of credit available. I hadn’t seen any balance transfer promotions, so I called the credit card company. After a few minutes over the phone, I was able to score an 18 month 2.99% promotion. While some of you might think that 2.99% is not that great, I had an average APR of 14%, so this was a big win. I took my highest APR balance and transferred it over while on the phone with the rep.
The key to playing and winning the balance transfer game is to make sure that you are not paying a balance transfer fee. This is a very common fee that credit card providers charge to “process” a balance transfer. Many do a set fee or a certain percentage of your balance transfer amount. I was able to get this fee waived due to the amount I was transferring, but the rep on the phone had to get the manager’s approval.
If you can’t get this fee waived, then make sure you calculate how much you will save by transferring the balance. Another aspect is making sure that you will be able to pay off the full balance by the time the promotion ends. If you don’t, then most balance transfers will retroactively charge you interest on the full balance that you transferred. It will negate the whole process.
There are some out there that think balance transfers are not good, but I think they are a useful tool. If you have had as much debt as I, then you will use any tool that is available in your toolbox. During my four years of paying down credit card debt, I played the balance transfer game 5 times. I would transfer a balance, pay it off, then transfer another balance. I found that when you pay off a credit card, many providers will entice you to come back and spend money. I didn’t want to spend more money, but I did want to use their balance transfer promotions to help me get out of debt.
If you are in debt and need some help paying off your credit cards, then why not try the balance transfer game? It might not decrease the amount of time it takes to pay off your debt, but it will decrease the amount of interest that you pay. Any little bit helps, right? I played the balance transfer game 5 times and won it each and every time. Those “wins” helped me get through my financial turmoil and right my ship.
Author Bio: Grayson is the owner of Debt Roundup, a personal finance blog dedicated to helping everyone get out of debt. Grayson dug himself out of $50,000 worth of credit card debt and has started to gain positive net worth. Check him out at Debt Roundup.