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By: Travis Cormier
Hey Travel Junkies,
Getting into points and miles can really change your life but there’s one golden rule you should always follow—even more important than the Chase 5/24 rule. Do you know what it is?
Don’t go into credit card debt for points and miles.
Interest accruing on credit card debt will quickly eat away the value you get from points and miles. And by “quickly”, I mean “immediately”.
Unfortunately, life has a fun way of throwing situations at us that we don’t always have the financial means to handle. If this has happened to you, you’re not alone. Did you know that less than 40% of Americans are able to cover an emergency expense of $1,000?
For whatever reason you have credit card debt, whether it is from college or a lost job, you really need to get it paid off before starting in the points and miles world. Not only will it be a weight off your shoulders, it will improve your credit score, making it more likely that you’ll get approved for lucrative sign up bonuses in the future.
Of course, interest fees can make it a challenge to pay off your existing credit card debt. If your current card has a 20% interest rate and you have a balance of $10,000, that’s $2,000 every year that the bank is getting from you that isn’t counting towards your original debt!
Instead of paying interest, you should look into doing a 0% balance transfer. A balance transfer can help you tackle your debt and get it paid off faster. Instead of giving your money away to the bank, you can put it towards your balance. With a 0% balance transfer, you’ll have a better chance of paying it off quickly.
Before we look at some of the best balance transfer credit cards available today, there are some factors to consider.
Factors to Keep in Mind for Balance Transfers
There are a few key factors to keep in mind when you’re doing a balance transfer. Banks will put a lot of information in the fine print, so what should you be paying attention to?
First, you should look at the duration of the 0% interest time frame. Will you be able to pay off your card in this time frame? If not, you should consider another option if possible, otherwise you will need to apply for another balance transfer credit card once your 0% promotional period has ended.
You should also pay attention to the bank from which you’ll be transferring your balance. Most banks won’t let you transfer balances you already have with them.
For example, if you have a $5,000 balance on a Chase Sapphire Preferred Card, you would not be able to transfer the balance to a Chase Slate. Chase won’t let you do this because they don’t want to refinance themselves. You can only transfer balances from other banks.
One big asterisk that often gets hidden is the balance transfer fee is that many banks will charge you a percentage on the balance transfer even if there is 0% interest. Balance transfer fees are typically 3-5%, but some cards offer a promotional 0% period. Keep in mind, if you can pay off your current balance in 3-4 months, your current APR may make it cheaper to pay the interest instead of the balance transfer fee.