There is no easier way to explain this, other than:
1. Borrow money for cheap!
2. Pay it off or transfer the amount out BEFORE the offer period is over.
3. Make sure your payments are going directly to the "offer" amount.
4. Save hundreds/thousands of dollars in interest.
THIS ONLY APPLIES IF YOU PAY OFF THE BALANCE OR TRANSFER IT OUT BEFORE THE OFFER PERIOD EXPIRES!
It is a bit complicated, but I will try and summarize it for you... and please, for your sake, try and have good credit. It will help you in the long run!
What you do is:
You apply for a credit card that has 0% APR for a certain amount of time (usually between 12-18 months). Credit Card issuers send offers by mail often, so look out for them. When you open up a new card, you have the option of charging a purchase directly to the card, or getting an amount transferred to your checking account (kind of like a Cash Advance). Some cards allow you to do both. I recommend using it for only one of the two purposes (I will explain why later).
Generally, with the cash option, they tack on a 3-5% fee of the total amount borrowed. For example, if you borrow $5,000, they will charge a fee of $150-$250. You have to be sure that the total amount borrowed plus the fee is less than your credit limit. Sometimes, if you're lucky, they will offer 0% fees (I have only personally seen this with Bank of America and Discover).
So let's say that you want to go on vacation in a year, but need to make the flight and hotel reservations now, and don't have the cash for it. You can charge it directly on that credit card, and make payments on it until the day of the trip, any time is fine as long as it is before the offer period expires. Usually, the minimum payments are around .1 to .5% of the total amount you charged (check your credit card terms for minimum payment info). There will not be any additional fees; the only amount owed on the card will be what you charged. I must also note that if it is a "rewards" card, you may get nice perks or cash back for the purchases... but that will be on another blogpost.
What if you lost your job and need cash now? The cash option would be more suitable for you. You will be able to get cash deposited straight into your checking account. However, this will most likely come with fees. At the end of the day, paying the fees are a much smaller price to pay than taking out a personal loan or a "title loan". Again, if you borrow 5k, technically, the total interest you will pay on it for 12-18 months will be $150-250!!!
Again,
THIS ONLY APPLIES IF YOU PAY OFF THE BALANCE OR TRANSFER IT BEFORE THE OFFER PERIOD EXPIRES.
If you do not pay the balance off or transfer it out BEFORE the offer period expires, the card issuer will back-charge you since the day the debt was incurred. In other words, you will be paying months/years worth of interest. Your new balance will be the remaining debt, plus the old interest that was just tacked on.
I cannot stress this enough. PLEASE take care of the debt at least 2-4 weeks before the offer period expires.
If you don't, you will not be playing the balance transfer game, but rather, you will be the one that got played... and we don't want that.
One thing I suggest is having a few cards open with an available credit limit around the amount you owe on the card, so that you can transfer the old debt out into the other. Even if you pay the 3-5% fees again, it is still cheaper than paying the back-charged interest, or the ridiculous interest rates that these loan companies charge. I have bounced debt between different cards before, you can keep doing this over and over, until you are able to pay the full amount off (as long as you have cards with credit available for use). Now, I don't condone long term debt, but sometimes, it is necessary.
I also recommend keeping track of all of your offer cards on an excel sheet, in order by offer expiration date, so you know which ones need to be taken care of first.
As I said earlier, I recommend only using the card for purchases, or balance transfers, not both. I have to note, some credit cards apply your payments old debt to new, while some apply new to old. Check with your card issuer to confirm. What may happen is that the payments are not being applied directly to the amount on the offer, but rather on purchases, and vice versa. You may think that all of the payments you made were applied to the balance transfer offer, and that the amount is paid in full, when really, the payments were being applied to stuff you charged on the card that were not part of the offer. This has happened to me before. To my knowledge, at the top of my head, I can say that CitiCards applies payments old to new, while BarclayCard applies them new to old. Please check with your card issuer to confirm.
When talking to a card issuer about all of the above, it is preferable that you do an online "chat", that way you have a transcript of the conversation. If over the phone, get their full name and direct line, or their employee ID. Also, before hanging up, state the terms of the card and have them confirm if you are correct. If they are not sure, ask to speak to a manager or their supervisor.
Once you get the hang of all of this, it is simple. You will know what to watch out for, and where to watch out for it. I have moved over 100k using this method, and have saved thousands in interest.
I hope that you, too, are able to enjoy the benefits of this method...
and remember...
1. Check with your card issuer to confirm the offer details.
2. Take care of the debt at least 2-4 weeks before the offer period expires.
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