Why Erin Lowry Says Moving Budgets Will Help Pay Off Debt

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Avoid the traps and plan to pay off your debt with our 0% annual rate offer.

Key Point

• Any balance not repaid by the end of the promotional period will be subject to ongoing interest.
• Paying a direct debit fee might make sense if it costs less than the interest you pay from your current card.
• Never miss a payment. Otherwise, the referral interest rate of the offer may be voided.

Banks are happy when customers sign up for direct debit credit cards. A direct debit offer sounds profitable, but the bank can make more profit if the customer fails to repay the transfer obligation within the allotted time. The hope is that customers will continue to pile up debt at high interest rates.

However, according to financial expert Erin Lowry, by following certain guidelines and planning, you can proactively pay off your debt through the 0% APR balance transfer introductory offer.

What is balance transfer?

A balance transfer moves balances from a credit card or other eligible account to another credit card. Balance transfer credit cards generally offer an initial 0% APR for a long period of time (up to 12 months or more). This allows consumers to save on interest by migrating high-interest debt to a 0% annualized card.

If you do not pay off the transferred balance within the offer period, the interest rate will jump from the promotional rate to the current rate and may increase significantly. In some cases, your card issuer may charge ongoing interest on the entire transferred balance.

When balance transfer is convenient

If you have credit card debt from a high-interest card, balance transfer is for you. It’s hard to pay off debt when you’re stuck with high interest rates.

You can find competitive balance transfer offers when shopping outside of your current bank or card issuer. Banks generally do not allow balances to be transferred from one card to another within their own credit card ecosystem. You must be a new customer of the issuer to be eligible for most balance transfer offers.

According to Lowry, balance transfers are a good option if you “don’t suffer from impulsive purchases.” If getting a new card makes you want to spend money beyond your means, it’s not worth the risk. You may end up accumulating new purchases and increasing your card debt even further.

Does paying a direct debit fee make sense?

Credit card companies typically charge an upfront fee to transfer the balance to your new credit card. Balance transfer fees vary by card issuer and card, but typically range from 3% to 5% of the transferred balance.

So if you have to pay a fee, is it worth getting 0% APR? It all depends. If the money you save in interest fees exceeds the cost of fees, transferring your balance can save you money in the long run.

Tips for paying off debt using balance transfer

If you manage to pay off your card balance during the promotion period, you can take advantage of significant savings without interest. Use the tips below to stay on course and avoid hefty interest and fines.

Keep track of your payments

You can qualify for a balance transfer card with a first year APR offer of 12 months, 15 months or 24 months. Don’t fall into the trap of thinking you have plenty of time to pay. Instead, have a plan, stick to it, and make your monthly payments on time. Some card issuers void promotional rates for non-payment.

don’t use the card for shopping

Do not use balance transfer cards for new purchases. It defeats the purpose of getting the card in the first place, which is to pay off existing debt. Lowry says, “Don’t carry it around in your wallet. Don’t link it to your Netflix account. Don’t let him spend a cent on this card!” Use for promotional balance transfer offers only.

check the fine print

Always read your card’s terms and conditions to see if there are any actions that may void your promotional rates or impose penalties.

If you have existing credit card debt, taking advantage of 0% annual interest is a wise move. Compare the length and fees of our direct debit offers to find the one that fits your needs. Make sure you can pay off your balance within the promotional period to avoid additional interest.