Using balance transfer offers to pay down credit card debt faster

The highest amount of credit card debt we ever had was around $35,000 if I remember correctly. It took us about 5 years to pay it off. Before we got aggressive at it, I hated seeing how much of our payments were going to the credit card companies as interest as opposed to actually paying down the debt! But I found a way to stick it to the credit card companies by using balance transfer offers.

You know what I am talking about, those pretty envelopes with the big 0% in bold letters on the front. They come from all the big banks and mention, of course, how your are "pre-approved" for this offer. Yay! I used to always throw them away, not even opening the envelopes. "We're in debt and the last thing we need is another credit card," I told myself. Then one day, a chance encounter with one of these envelopes caught my eye (ok, who am I kidding 'chance encounter'; we got them like every week). It was from Chase and said "0% interest for 18 months. No balance transfer fee." What?!?!

I ripped open the envelope, read the find print (this is important), and checked it out. Yep, it was legit. So I signed up (actually it was for my wife, but I handle all this stuff). They gave us a $9,500 limit and we transferred $9,000 as quickly as we could. I divided the total by 18 and added a monthly payment automatically from my online bill pay for that amount for the next 18 months, ensuring it gets paid off.

Guess what happened next...Discover, the company that we transferred the $9,000 from, decided they wanted our balance to go back up again and offered us a 12-month, 0% interest, no transfer fee balance transfer on our card. No way! So we took the balances off of 3 smaller cards and put them on there. It's an unusual feeling to have thousands of dollars of debt, but not really care that much about it or lose sleep over it because you are paying it off and there's no interest being charged. It's odd, yet amazing.

Over the next several years, we did many balance transfer offers. We ended up doing ones that even had the 3% fees attached. It made sense because if you did the math, the fee was always way less than the interest that would be charged as long as the term was at least 12-18 months. So even if we didn't get any no-fee offers in the mail, we still took advantage of moving any interest-ridden debt to a no-interest balance transfer card. Using rough, back-of-the-napkin math I figure we knocked out our credit cards about 6 or 7 years earlier than had we kept paying all that interest but made the same payments.

One ancillary benefit was that not only were we paying down debt faster with less interest using this method, we also gained more credit cards, which means our total credit card limits were higher, thereby reducing our credit card utilization percentage (the amount of your credit cards you are using compared to your limit). The lower the percentage, the higher your credit score goes up. So even with tens of thousands of dollars of debt, our credit score kept climbing on up to the mid 700's as we were paying off our cards.

Remember, this only works if you aren't adding more charges to your credit cards at the same time you are paying down debt! That usually doesn't work out too well. When you get those new cards, only put balance transfers on them. NEVER make any transactions with them. We have about 6 credit cards that we have which have never seen the light of day. The only amounts that have been on them are balance transfers. That first Chase card we got with the 0%, no-fee for 18 months's never been swiped. I went back and looked up our statements and we've put $20,800 on that card and paid about $360 in fees. I think that works out to 0.3% APY interest.

I admit that we got lucky on this one with the two no-fee offers in a row, but even with just the 3% transfer fees, these offers are pretty good deals as long as you aren't putting any more charges on your cards. If you are still having trouble paying down debt while not adding more...I wouldn't recommend trying this until you have that part down. Seriously! But if you are working hard and paying down your credit cards, not adding anymore charges, and have a fresh balance transfer offer in the mailbox, I say give it a go. In the long run the credit utilization and lower interest rate, even if temporary, will help you improve your debt situation and get you on your way to retiring earlier and richer!

Have you tried this method of paying down debt? Think we're crazy to even suggest it? Let us know in the comments below!

Chris grew up in the United States but felt the world calling. After working throughout his twenties climbing the executive ladder, he left the corporate world in order to have the free time needed to focus on family more than money. Since then he has never held a regular job and spends his time honing his skills to make money grow on trees.He now travels the world with his wife and two sons.

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