| Christmas Credit Card Bills |
| By Credit Federal |
Published
12/30/2007
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Financial Tips
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Balance Transfer Christmas Credit Card Bills
One way to lower high credit card bills caused by excessive Christmas shopping charges, is to balance transfer to a 0 intro card.
If; for example, you have three credit cards with the following balances and interest rates, and if you intend to payoff those balances within 6 months, you can save over $500 by balance transferring to a 0 intro card.
Example:
Credit Card #1: $2,000 @ 23% = $356.06 per month for six months
Credit Card #2: $3,000 @ 19% = $528.08 per month for six months
Credit Card #3: $5,000 @ 17% = $875.15 per month for six months
Charges: $10,000 Payments: $10,555.74 Interest: $555.74
Now, if you balance transfer the $10,000 of charges to a credit card with a 0 introductory period of six months, and still paid off those charges within 6 months, you would save $555.74.
If you didn't pay off the full $10,000 within 6 months and still owed $4,000 after the 0 intro period expired and went to a 20% interest rate for balance transfers, your total payments and interest would be:
$4,000 balance at end of 6 month 0 intro period:
Payment per month for additional 3 months: $1378.03
Total paid at end of additional 3 months: $4134.09
Total interest paid: $134.09
As you can see, even if you need 9 months instead of 6 months to payoff credit card Christmas charges, you can still save money by transferring your existing card balances to a 6 month 0 intro card. As in the example we've given, the post-introductory interest rate on the new, balance transfer card is actually higher than the rates for two of the existing credit cards. So how do you still save money? Because by the time the 6 month introductory period expires, you would have drastically reduced the total amount of debt (balance). In our example, while in the 6 month intro period you paid off $6,000 of the $10,000 in charges. Hence, though you needed an additional 3 months to payoff the balances, you only had to pay interest on the remaining $4,000.
In addition to being able to save money, one other item of importance is certain. In order to qualify for a 0 intro credit card, you must have excellent credit. Also, be sure you read the Terms/Conditions carefully. Not all 0% intro cards extend that special introductory rate to balance transfers, and may only give that intro rate to 'new purchases' that are made with the card. Additionally, some cards may have caps on how much you can transfer, and the special intro rate may be terminated if your transfer and new purchases exceed an allowable limit. Other factors; such as late payments on the card or even on other lines of credit, could void your introductory rate. Again, it's very important to fully read and understand all the fine print of the card's Terms and Conditions.
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