0% APR credit cards can save you a ton of money! Not only can you save on new purchases, but you can avoid interest on your existing credit card balance for 12 months or more. While many people make the mistake of overspending and creating even more debt with these offers – if used correctly, zero apr credit cards can free you from credit card debt altogether. Here’s how:
Paying Off Debt w/ 0% Credit Cards
Normally, you have two options when trying to consolidate your credit card debt: ONE, get a debt consolidation loan -or- TWO, apply for a home equity line of credit. Most people never consider a 0% APR credit card – but it may be a better option. Using a 0% APR credit card will allow you spend more money paying off your balance, and less money on interest. If your credit is in good shape, a 0% credit card will allow you to payoff your credit card debt even quicker than a consolidation or home equity loan.
How to use a 0% APR to become debt-free:
- Transfer your existing credit card balances to a 0% APR credit card.
- Continue to pay down your balance as usual. But instead of paying just the minimum each month, add the amount of interest you saved and pay it as well.
- Watch your introductory period. When it’s about to expire, shop around for a new 0% APR credit card and transfer your balance again.*
- Continue this cycle until you’re debt free.
* Transferring credit cards on a regular basis can have a slightly negative impact on your credit score (in the short-term). But this will repair itself over time. You can limit the amount
of transfers you make by finding the longest intro rate possible.
0% APR Credit Cards vs. Debt Consolidation
If you’re still considering a debt consolidation loan instead of a 0% APR credit card, you may be in for a surprise. Let’s examine the details to see how much you can save, and how much quicker you can pay off your debt using the method shown above:
Assume you have an existing credit card debt of $15,000. You’d like to pay $250 per month until the debt is paid off. Your debt consolidation loan was approved at 7% (much lower than your original 12% credit card!).
|Total Principal Year 1||$2,014|
|Total Principal Year 2||$2,160|
|Total Principal Year 3||$2,316|
|Total Principal Year 4||$2,483|
|Total Principal Year 5||$2,662|
|Total Principal Year 6||$2,855|
|Total Interest Paid||$3,516|
|Total Amount Paid:||$18,516|
|Total Payments Made:||75|
Now let’s compare paying off this same debt using 0% APR credit cards.
|Total Principal Year 1||$3,600|
|Total Principal Year 2||$3,600|
|Total Principal Year 3||$3,600|
|Total Principal Year 4||$3,600|
|Total Principal Year 5||$600|
|Total Principal Year 6||$0|
|Total Interest Paid||$0|
|Total Amount Paid:||$15,000|
|Total Payments Made:||60|
You save $3516 over a six year period! Plus you’ll be done with your payments 15 months sooner. Imagine being debt free over a year ahead of schedule.
Words of Advice:
Paying down credit card debt with 0% APR credit cards is a smart move. But try not to switch credit cards too frequently. Doing so can negatively impact your credit report (in the short-term). Shop around for 0% APR credit cards that have the longest intro periods and the lowest APRs (after the intro) to buy you a little breathing room. Also, don’t fall into the trap of reusing your old credit cards. Either close them or deactivate them so you don’t get yourself further into debt. And don’t overspend with your new credit card either (even if it is 0%)! Finally, make sure you apply the money you saved on interest to your new payments to help eliminate your debt faster.
* See our complete list of 0% APR Credit Cards →