Set up Automatic Balance Transfer Payments to Pay Off the Debt Before 0% of Your Initial Annual Interest Income Expires
If you have a lot of credit card debt and monthly interest is increasing, a credit card with a balance transfer can be a great way to pay off that debt without paying interest. In exchange for a small balance transfer fee (usually 3% to 5% of your transferred balance), these cards give you an interest-free grace period during which you can redeem your balance in full.
However, it is easy to tell yourself that you will pay off this balance “in the end.” If you want to make sure that you pay off your balance before the initial 0% annual interest rate expires, it’s time to do some calculations and set up automatic credit card payments.
Basically, you want to figure out exactly how much money you will need to pay in order to clear your balance before the initial period of the 0% annual interest rate ends. Then you will want to set monthly auto payments to cover that amount. As CNBC explains:
For example, if you are transferring a $ 3,000 balance to a card without interest for 15 months, simply divide your $ 3,000 balance by the length of the introductory period (15 months). You will find that you have to pay $ 200 a month to ensure that your balance is $ 0 before the end of the introductory period, provided you are not making any new card charges.
If you are calculating and realizing that you cannot afford to pay $ 200 a month (or whatever your calculations are), it is still a good idea to pay off as much of your balance as possible before the initial 0% annual interest rate period. expires. After all, the lower your balance is when the interest-free grace period expires, the less interest you will have to pay for what is left on the card.
As for “what’s left on the card”: make sure you don’t pile up a ton of new credit card debt when you pay off your old balance, because then you will be right where you started. Some balance transfer credit cards allow an initial 0% annual interest rate period to apply to both your transferred balance and any new purchases you make with the card, which can encourage consumers to pay a bunch of additional fees because, hey, they’re interest free. !
If that’s you, remember to adjust these carefully calculated auto payments to clear both the old and new balances.