Balancing Act

From time to time, people write in asking us various financial questions. While all the user disclaimers apply and you should consult with your CPA, financial advisor and/or attorney before taking any action, we will present the first Q&A here.

Question:
I have some revolving credit debt on high interest credit cards that I would like to pay off using a zero interest or low interest credit card.

I have an application from Chase offering 0% until May of 2008 and I have a an offer from Discover offering 3.9% on balance transfers until 2010.

Which would be the better card to use for paying down the debt?

Thanks,

M.S.

Reply

Dear M.S.

First, let me offer my congratulations to you that you are being proactive managing your credit and paying off your debts.

...

If I recall, many of the offers from Discover charge a 3% fee for balance transfers. This is something to consider when looking at the offer.

Assuming your credit is pretty good and you are serious about making the most of your 0% interest time, I would suggest taking the 0% interest from Chase for the year. Depending on your total debt situation, either pay down your highest interest debts first or pay this debt down while it is interest free if no other debts exist.

As your deadline gets closer keep your eyes open for other 0% offers. Assuming your credit is clean there will likely be opportunities to transfer the balance again to either another 0% card or a low interest offer. In the meanwhile you will give yourself some time to really make a dent on your current debt owed.

Of course this only works as long as you do not take on additional debt.

Good Luck!

Jason