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smclww

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Transferring 20% APR balance to 0% APR balance
Okay so would transferring a 2000 owed balance with 19%APR to a 0%APR balance card fpr 12 months be a good thing to do?

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Kudos!

Kudos for looking for a way to cut down your interest expenses.

The balance transfer offers often have a balance transfer fee, typically 3% to 5% with a minimum of around $10, so that could be as much as $100 on a $2000 transfer (though credit unions will frequently offer balance transfers with a lower fee).

If you keep this in your current 20% account, you could pay as much as $400 interest over the next 12 months.  If you pay it down evenly  over the course of a year so that it's paid off after 12 months, your interest would be around $200, whereas if you do this balance transfer and pay it off within 12 months, you'll save all that interest except for the balance transfer fee.

If you happen to have some extra cash lying around, use that to pay down your balance on your current credit card, so you don't have to pay the balance transfer fee on it.  For instance, if you have $300 lying in your sock drawer, pay that towards your $2000 balance, then do a balance transfer for just $1700, so a 5% balance transfer fee would be $85 instead of $100 (if there's no balance transfer fee, then you can freely ignore this advice).

The trap some people get into is to continue to make minimum payments, in which case, at the end of the 12 months, you'd still have a balance of about $1500.  You've still saved a lot of money (because you just paid the balance transfer fee instead of  the 20% interest you'd pay over the course of a year), but you've given up the opportunity to get this high-interest loan off your back.

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