Should I Consolidate My Credit Card Debt With a 0% APR Card?

Committing to paying off your credit card debt is a smart idea. If you’re just getting started, a good first step is finding a way to lower your interest rate – this will mean faster progress and lower costs in the end.

One possibility is using a 0% APR card to consolidate your high-interest debt. But what does this mean, and should you consider doing it? Take a look at the details below to decide if this option is right for you.

What it means to consolidate with a 0% APR card

If you’re not familiar with what it means to consolidate your debt with a 0% APR card, the concept is fairly simple: Credit card companies offer limited-time 0% APR periods on some of their cards. If you apply for one and get approved, you can move your high-interest debts onto the 0% APR card. This is known as a balance transfer.

Once you’ve moved all your high-interest balances onto the 0% APR card, those cards are considered paid off. You’ll then start paying on the new card until the debt is settled.

Nerd note: If you don’t have very good credit, you might not be eligible for a 0% APR balance transfer deal. In this case, another option is to apply for a card with a low ongoing APR. These cards tend to be easier to qualify for, and you’ll still get the benefit of a lower interest rate than you have on your other cards.

Benefits to taking this approach

There are a lot of great reasons to consolidate your credit card debt with a 0% card. For example:

• Interest savings: The main advantage to consolidating your debt with a 0% card is that you’ll save money on interest. Many credit cards charge up to 30% interest, so if you’re carrying a balance on several cards charging a high rate and you’re able to move them to a 0% APR card, you’ll save hundreds of dollars (possibly thousands) in interest.

• Simplicity: Consolidating several debts onto one loan or card makes your financial life easier. You only have to worry about making one payment every month, and won’t have to deal with the conundrum of which card to pay first. Plus, consolidating with a 0% APR card is one of the most hassle-free options out there. As long as you qualify for the card, moving your balances onto it is a breeze.

• Comparatively low risk: Compared with other consolidation options, moving your high-interest debt onto a 0% card is a low-risk choice. For example, if you use a HELOC — a home equity line of credit — to consolidate your debt and then are unable to make payments, you could lose your house. With a 0% card, you don’t have to worry about this type of outcome.

Pitfalls to watch out for

Although a lot of people choose to use a 0% card to consolidate their credit card debt, there are drawbacks and risks to consider. For instance:

• Fees: The most significant drawback to consolidating with a 0% card is the fees associated with it. Most issuers of 0% APR cards charge a 3% fee every time you move a balance onto it. This could be a big expense if you’re transferring several large balances. There is one card that doesn’t charge this fee for a period after you open an account.

• Not paying off the card before the 0% APR period is up: It’s important to remember that 0% APR periods don’t last forever. If you’re not disciplined, you’ll end up paying the ongoing APR on a very large balance.

• Paying late: If you’re typically not good about paying your bills on time, signing on to a 0% APR offer probably isn’t for you. Making even one late payment during your introductory period will likely result in the deal being canceled. If this happens, you’ll have to start paying the ongoing interest rate right away. Again, this could mean you’ll end up paying a high rate on a very large balance.

• Making the problem worse: When you consolidate your credit card debt with a 0% APR card, it’s important to resist the urge to charge up the original cards again. If you do, you’ll end up in even more debt. If you know you won’t be disciplined enough to stop swiping, a different consolidation method might be better for you.