It’s hard to believe that a little piece of plastic could cause as much controversy as the credit card does. I have some friends who love them, some friends who hate them, and some whose lives have been virtually ruined by them.
I’ve found credit cards to be useful, mostly for their cash-back options (which we’ll talk about on the blog another time), but what happens if you get yourself into credit card debt and need some time to pay it down? Well, as long as you recognize that I’m not an investment advisor and that you should talk to yours before doing anything radical, then read on.
Many credit cards have a relatively unknown feature called a “balance transfer” (you can usually find it pretty easily on your credit card account page online). Here’s how a balance transfer works – let’s say you have two credit cards. Credit Card A (CCA) is maxed out at a $5,000 balance of a $5,000 credit limit, and Credit Card B (CCB) has a balance of $1,000 out of a $7,500 credit limit. With the press of a button you can transfer the $5,000 from CCA over to CCB, resulting in CCA having a zero balance and CCB having a balance of $6,000.
But why would you do this? You’re just moving your debt from one credit card to another, right? Well get this – most of the time, your credit card will offer a special promo on balance transfers. Do you know what the most common promo is? Zero percent interest for one year. Yes, you heard me right. ZERO interest.
So after transferring the balance, you can now pay down CCB without paying interest on the money you transferred for the next 12 months. But what if you aren’t able to pay it down in 12 months? Well, go back to CCA and see if CCA will do the zero interest balance transfer promo back on CCB!
Don’t believe this will work? I’ve used this strategy multiple times to fund real estate investing projects I’ve done. I’ve found it to be a great way to get free money or to pay down a credit card.
Note: Balance transfers can impact your credit score in certain situations.