Highlights of today's show:
- 0% Credit Card Transfer offers
- Can help you get out of debt
- Figure out the transfer fees and APR first
- Must learn how to live on less and stop using credit cards first
- Interest rate, however, is not your big problem
Since the month of April is National Financial Literacy Month, I thought I would answer a question I get from time to time when working with clients about 0% credit card balance transfers. You know my opinions on credit card usage and how I want you to pay off any outstanding balance, but I am not against using a 0% credit card transfer offer if you look into a few details and have some other things squared away first.
The things you first need to consider are; what is the initial transfer fee, what is the APR on the card after the 0% offer expires, and are you going to use the card for purchases. The transfer fees are important because sometimes you can actually pay more in the transfer fees than you would in interest. The APR is important because you might be paying more in interest if you cannot pay off the balance before the 0% rate expires. Finally, if you are not serious about getting out of credit card debt and instead keep using the card to make purchases, then I would not make the deal because you are getting caught up in the vicious cycle of credit card debt.
With all this being said, remember that the interest rate on your credit card is only 10% of the problem. The actual DEBT on your credit card is the other 90%. We can spend so much time trying to reduce our interest rate and think that we actually accomplished something, but if you never pay off the debt then you really have not made much progress. So before you do a 0% transfer, please ensure that you are living on less than you make, make the commitment to stop using credit cards and instead use debit or cash, and finally figure out ways to put more money each month on your debt snowball. If you get those areas under control first, then I would consider going ahead with the transfer.
In addition, we also discuss an article I wrote for the blog this past week asking the question “Is your mortgage really a tax advantage?” This question was inspired by The Debt Free Living interview with Crystal and the post breaks down scenarios where a mortgage might have little or even no tax advantage at all. My challenge to you this week is to figure out how much your mortgage is saving you in taxes. Chances are it is saving you a lot less than you think.
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