Fixed APR Balance Transfers Better Than A 0 APR
Below is a MRR and PLR article in category Finance -> subcategory Other.
Fixed APR Balance Transfers: A Superior Choice Over 0% APR Offers
Summary
While 0% APR balance transfers are enticing for short-term savings and quicker debt reduction, they typically only last for up to 15 months. This timeframe is often insufficient for fully paying off significant credit card debt. Consequently, consumers face the dilemma of dealing with regular interest rates or transferring balances again. Surprisingly, fixed APR balance transfers often provide a better solution.
Introduction
0% APR balance transfers promise short-term relief and can save consumers substantial sums in interest. However, these offers are generally limited to about 15 months. Many people underestimate the complexity of continually securing such offers, especially with substantial credit card debt.
The Risks of Chasing 0% APR
Consider a real-life scenario where an individual attempted to save on student loan interest by transferring a $20,000 balance to a 0% APR credit card. Initially, this seemed promising, anticipating a $1,600 savings in the first year. The plan unraveled when he struggled to secure another 0% APR card for the remaining $18,000. He only managed to transfer $2,000, leaving $16,000 at a 12% interest rate. What seemed like a smart move turned into a financial mess, unlike the stability offered by his original 7.99% loan.
The Benefits of Fixed APR Balance Transfers
Fixed APR balance transfers present a more reliable strategy for managing long-term debts, such as student or car loans. Currently, credit card companies offer fixed APR rates as low as 3.99% for the lifetime of the balance. This rate often undercuts those of student loans and car loans, allowing consumers to save significantly each year.
For those considering a second mortgage to pay off high-interest credit card debt, a fixed APR transfer could be a smarter choice. With rates as low as 3.99%, it might be lower than the interest on a second mortgage and avoids costly refinancing fees. Crucially, this option preserves the equity in your home.
Conclusion
While 0% APR balance transfers are appealing in the short term, fixed APR credit cards offer a sustainable, interest-saving solution for those tackling high-interest loans and credit card debt over longer periods. Consider how much better off my acquaintance would have been had he chosen a 3.99% fixed APR card for his $20,000 debt instead of relying solely on 0% APR offers.
© 2006 Credit Card Depot Inc.
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