This guest post was written by Jason Bushey. Jason runs the day to day operations at Creditnet.com
With holiday shopping season now in full swing, odds are your credit card has seen more action of late. And while using your credit card on holiday purchases isn’t necessarily a bad thing, snowballing interest fees in January, February and beyond definitely are.
When you’re paying 20% interest or more on your Black Friday purchases, that sweet deal you received on a new flatscreen doesn’t seem like such a bargain anymore.
So how do you shake the holiday shopping hangover exorbitant interest fees have stuck you with? It’s simple: transfer your credit card balance to a new, 0% interest credit card.
Here’s how it’s done:
Find a credit card with a 0% intro period that applies to balance transfers
You know how credit cards offer those great introductory periods with 0% interest? Some credit cards extend these periods for up to 18 months (like the Citi Simplicity® Card, for example) and include both purchases and balance transfers.
So, when looking for a new credit card to transfer your balance to, the first thing you’ll want to look for is a 0% intro period on balance transfers.
Next, come up with a conservative timetable on how many months it will take you to pay back your credit debt. This will help you determine which credit card intro period best fits your budget, whether you need 12 months, 15 or more.
Once you’ve found a credit card that you’re sure includes 0% interest on balance transfers and meets the criteria for other features you might like (miles, points, etc.), go ahead and apply for your new credit card. Once you’re approved…
Transfer your credit card balance as soon as you get your card
Now that you’ve got your new credit card, you’ll want to take advantage of the intro period immediately. But before transferring your balance, there’s one important thing to consider: How much is your new credit line?
A credit utilization ratio of more than 30% can have a negative effect on your credit score. That is to say, if you’re using 30% or more of your credit line on a card and reporting this balance to the credit bureaus each month, your credit score could be (and probably is) dropping.
So before transferring your debt, make sure you’re transferring less than 30% of the available credit line on your new card. If your new credit line is $1,000, then transfer $300 or less.
In general, it takes 7-14 days for a credit debt transfer to go through. (I know from personal experience that the credit card company literally snail mails a check to the other.) Taking that into consideration, it’s best to transfer a debt at the beginning of a billing cycle to ensure that your balance is transferred in time for your next bill.
Have your new balance transfer credit card ready to go for 2013
If you don’t want to pay any interest on your holiday purchases in 2013 – and we think you might since you’ve made it to this point in the article – get your new credit card before your upcoming billing cycle in January, 2013. You’ll shop (and sleep) easier knowing that you won’t be stuck with holiday spirit-killing interest fees on your credit card bill in the new year.
Generally, it’s a bad idea to have too many credit cards since it can increase debt and kill your credit score, so we wouldn’t recommend doing this every year. What we WOULD recommend, however, is doing your best to pay off as much of your debt as you can, interest-free, during your new card’s introductory period. And if you get all of your debt paid off, you’ll never have to worry about transferring your balance and paying interest again.
See, you’re back in the holiday spirit already! Now can you please pass the egg nog?…