During December, people spend a lot less time worrying about saving money than they do on saving it. The holidays are, after all, a time when most of us spend more money than during any other period of the year. Many people use credit cards with high interest rates to purchase gifts without clear re-payment plans. And then December’s credit card bills hit mailboxes and people rush to 0% balance transfer credit cards in January.
In the past, spending on high interest cards and transferring the debt to a new credit card was easy and inexpensive. However, with the rise of balance transfer fees from near zero to around five percent, waiting until January to do balance transfers is not as good of a strategy as it used to be. Here are a few good reasons to transfer balances in December and use a 0% credit card for new purchases during the holidays.
1.) Balance Transfer Fees: Typical balance transfer fees have risen substantially since a year ago. At that time, the most it might cost to transfer a $1000 balance was $30. Today it is $50. Thus, if you spend $1,000 on a high interest credit card and want to get a 0% rate later, you’ll pay $50 for that privilege. If, on the other hand, you put all your new purchases on a 0% credit card (and transfer your balances from you high limit card) you’ll save 5% in fees, plus a month’s worth of interest by doing a balance transfer early.
2.) New Credit Card Laws: Some of the new credit card laws went into effect in August. The others are slated to take effect on the 1st of February. Between now and then, credit card companies still have the ability to jack up your interest rate-and running up a big holiday season bill may give your current credit card company a reason to raise your rate at the last minute. With interest rates already high, you could find that a thousand dollars spent on a credit card with a 15% interest rate may end up with a 25% interest rate, leaving little option but to close the account or transfer the debt to a 0% credit card.
3.) Credit Card Companies: All year long, credit card companies have been punishing consumers with higher rates and fees. When the new credit card laws pass, they may tighten their belts further by limiting the availability of 0% balance transfer deals. This, in turn, may make it extremely difficult to transfer balances after the holiday season, as banks may curtail low rate credit card lending when the new laws take effect.
Ultimately, there are hundreds of reasons to take advantage of 0% APR balance transfers for 1 year. The average person can save over $100 for every $1,000 transferred to a 0% credit card when fees are taken into consideration. A person with $5,000 in credit card debt could save around $60 in interest by transferring a balance today instead of a month from now. And with 5% balance transfer fees becoming the norm, anyone who may need to transfer a balance after the holidays can basically save 5% by using a 0% credit card now instead of waiting.