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Got Debt? Save Over $1,300 With a Balance Transfer Credit Card in 2017

New Year's Day represents a clean slate -- the ultimate Monday (even when it falls on a Sunday). With a new calendar comes new possibilities. The chance to be the person you want to be. The very best version of yourself.

For many of us, our best self doesn't have credit card debt, so we resolve to pay it off once and for all. A recent NerdWallet survey found that more than a quarter of Americans (27 percent) have the financial goal of paying off some or all of their credit card debt in the coming year.

[See: 10 Financial New Year's Resolutions.]

Paying off credit cards is a lot easier when you don't have interest charges pumping up your debt at the same time you're trying to shrink it. That's where a balance transfer credit card comes in.

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How Balance Transfers Work

A balance transfer is the act of moving debt from one or more credit cards to a new card with a lower interest rate. Balance transfer credit cards typically give you an introductory period with 0 percent interest. Most cards charge a balance transfer fee of 3 to 5 percent of the amount transferred, although a few don't have this fee.

The average household with revolving credit card debt carries a balance of $6,885, according to a recent NerdWallet study. Based on average credit card interest rates, this costs approximately $1,300 in interest per year. With a good balance transfer credit card, you can work to pay off your debt without paying this interest.

How to Choose the Right Balance Transfer Card

When evaluating balance transfer credit cards, pay special attention to three things: the balance transfer fee, the introductory offer terms and the bank that issues the card.

Transfer fee. A balance transfer makes financial sense only if it saves you money, so make sure your interest savings will outweigh the fee. For a household with that $6,885 in revolving credit card debt, for example, a 3 percent fee would be $207, and 5 percent would be $344 -- much less than the $1,300 in interest you might have to pay otherwise.

There are cards with a $0 fee for balances transferred within a certain period after opening the card account. Such cards aren't necessarily easy to get, but if you have good credit, it's worth looking for these deals.

[See: 12 Simple Ways to Raise Your Credit Score.]

Introductory offer terms. The 0 percent interest period on balance transfer cards usually lasts 12 to 18 months, with some going to 21 months or more. You don't necessarily have to look for the longest 0 percent period. You just need a card with a time frame long enough for you to pay off your balance before interest kicks in.

Issuing bank. You generally can't transfer a balance between credit cards from the same issuer. Banks make 0 percent interest offers available to attract new credit card business. If you're already a customer and paying interest, the bank likes you right where you are. So when looking for a balance transfer deal, pay attention to who issues your current card or cards and who issues the card you'd like to apply for.

[See: 25 Fast Financial Fixes.]

Using a Balance Transfer Card to Get -- and Stay -- Out of Debt

A balance transfer card with a 0 percent interest offer can be a helpful tool for eliminating your debt -- or simply a way to avoid dealing with that debt, putting off the reckoning until later. It depends on how you use it. Avoid doing these two things:

-- Running up new debt on the old card: Don't use this opportunity to charge up a balance on your old card once your current balance is transferred. Credit cards are best used when you can pay the balance in full each month, which avoids interest. You don't want to get back into debt.

-- Playing the balance-transfer game. This refers to moving your balance from card to card repeatedly without making any real progress on your debt. Transfer fees add up, and the point of making a transfer should be to fix the problem, not avoid dealing with it.

Some cards charge retroactive or "deferred" interest if any part of the transferred balance isn't paid off before the introductory rate expires, so you should know if this is your card's policy, just in case.

If you're going to transfer a balance, make a plan to wipe it out. The easiest method is to divide your balance by the number of months in your 0 percent interest period and then pay that amount each month. Otherwise, put whatever you can toward your balance each month to get it paid down as quickly as possible, ridding you of debt and growing interest for good.



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