Is it OK to use a credit card on zero-interest to pay some other credit cards with higher-interest?
"Many people who do transfer a balance from one credit card to another have no clue as to what is going on and how credit cards work. If you transfer a balance from one credit card to another, you are charged a fee of anywhere from 3% upwards (subject to a minimum of $10 or so) up front. If Credit Card A has balance $1000 and you transfer it to Credit Card B which is offering no interest for a year on the transferred balance, you owe Credit Card B $1050 (say). In most cases, that $50 has to be paid off as part of the following month's bill. If you are carrying a revolving balance on Credit Card B, that $50 will typically be charged interest from the day of the transfer. Your monthly bill will not (necessarily) include that $1000  you owe for one year or six months or whatever the transfer agreement you accepted says. If you tend to pay anything less (even a penny) than  full payment of each month's bill on Credit Card B, your partial payment will be applied to that $1000 first, and anything left over will be applied to the monthly balance. In short, if you don't pay in full each month, that $1000 will not be ""yours"" for a year; you may end up paying $50 interest for  borrowing $1000 for just one or two months, and the rest of your balance is the gift that keeps on giving as the credit card company likes to say. UPDATE: This has changed slightly in the United States. Any amount paid over the minimum amount due is charged to the higher-interest balances. So in this case, if you had $1000 at a 0% promotional rate and a regular balance of $500, and the minimum payment was $100, and you paid $150, $100 would pay down the promotional balance, and the extra $50 would pay down the regular balance.  About the only way to make the deal work in your favor is to Transfer money only if you have paid the full amount due   on the last two statements before the date of the transfer and are   not carrying a revolving balance. Check your monthly statements   to make sure they show Finance Charge of 0.00.  Many people have   never seen such a sight and are unaware that this can be observed   in nature. Make sure that you pay each month's bill in full (not   the minimum monthly payment due) each month for a whole year   after that. Make sure that the bill containing that $1000 (coming out a   year after the transfer date) is also paid in full. Very many credit-card users do not have the financial discipline to go through with this program.  That is why credit card companies love to push transfer balances on consumers: the whole thing is a cash cow for them where they in effect get to charge usurious rates of interest without running afoul of the law. $50 interest for a one-year loan of $1000 is pretty high at current rates; $50 interest for a two or three month loan where the customer does not even notice the screwing he is getting is called laughing all the way to the bank. See also the answers to  this question" I am sure everyone is different, but it has helped me a great deal. I have had several card balances go up and the interest on those per month was more than $200 in just interest combined.  I transferred the balances over to 0% for 15 months – with a fee, so the upfront cost was about $300. However, over the next 15 months at 0% I'm saving over $200 each month.  Now I have the money to pay everything off at 14 months. I will not be paying any interest after that, and I cut up all of my cards so I won't rack up the bills with interest on them anymore. Now, if I can't buy it with a debit card or cash, I don't get it.  My cards went up so high after remodeling a home so they were justified. It wasn't because I didn't pay attention to what I could afford.  My brother, on the other hand, has trouble using credit cards properly and this doesn't work for him. "The short answer is no, it's probably not ok. The longer answer is, it might be, if you are very disciplined.  You need to make sure that you have enough money to pay off the card after a year, and that you pay the card on time, every month, without exception.  There may also be balance transfer or other fees that only make it worth while if the interest rate or balance on the other loan is high. The problem is most of these offers will raise your rates to very high levels (think 20% or more) if you are even one day late with one payment.  Some of them also will back charge you interest starting from day one, although I have only seen this on store credit ""one year, same as cash"" type offers.   In the end you need to balance the possible payoff against how much it will cost you if you do it wrong.  Remember, the banks are not in the business of lending out free money.  They wouldn't do this unless enough people didn't pay it back in one year for them to make a profit." "The short answer is: it depends. The longer answer is that balance transfers are tricky, and often a bait-and-switch; they'll offer 0% interest, but charge a 3-4% ""fee"" (which isn't interest and is perfectly legal) on the amount transferred. If you transfer $5000, you now owe the new card company $5,200. Now, that could be fine with you; at an 18-20% APR on your old card you may have been charged that much in just one or two months, and by capitalizing this fee up front you lock in 0% for a year. However, there are other possible machinations behind the scenes. For instance, you may incur retroactive interest on the full balance if not paid off in the year (at 20% APR on $5000, that's an extra grand you will owe if there's even one dollar of the original transferred balance left in the account). Paying off the balance and thus avoiding these penalties has actually been made harder by the CARD Act, which required creditors to apply any payment made to the highest-interest portion of the balance first. As balance transfers are 0% they are the last on the list, so if you transfer a balance and then carry an additional balance you are setting yourself up for failure. You MUST have a zero-dollar balance for one month sometime during the year in order to be sure the balance transfer is paid off and no penalties will be incurred. That can be hard, because 5 grand is a lot to pay off. To pay off a $5000 balance in 12 months requires payments of $417. Miss one and you'll have to make it up over the remaining months. If you transferred a balance, you probably didn't have $420/mo to pay to the card in the first place. In summary, balance transfers can work, but you have to understand all of the terms and conditions, and what will happen should you violate any of them. If you don't understand what you're getting into, you could very well end up worse than you started." "Here's the issue as I see it. The fact that one has high interest debt says a lot about the potential borrower. Odds are very good that person will not pay the zero card off before the rate expires, and will likely charge more along the way.  I'd love to be able to say ""great idea, borrowing at a low rate to pay off a high rate card will be the first step to getting you all paid off"" but chances are in a year's time you will not be better off.  You said you know a lot of people that have done this. Have they all been successful? It's possible, but I'd heed the warnings of those here and first think how you got into the credit card debt." "I've done exactly what you are describing and it was a great move for me. A few years back I had two credit cards. One had a $6000 balance and a fairly high interest rate that I was making steady payments to (including interest).  The other was actually tied to a HELOC (home equity line of credit) whose interest rate was fixed to ""prime"", which was very low at the time, I think my effective rate on the card was around 3%.  So, I pulled out one of the ""cash advance checks"" from the HELOC account and paid off the $6000 balance. Then I started making my monthly payments against the balance on the HELOC, and paid it off a bit more quickly and with less overall money spent because I was paying way less interest. Another, similar, tactic is to find a card that doesn't charge fees for balance transfers and that has a 0% interest rate for the first 12 months on transferred balances. I am pretty sure they are out there. Open an account on that card, transfer the balance to it, and pay it down within 12 months. And, try not to use the card for anything else if you can help it." "good vs ""bad"" debt in the context of that post. At least in the UK this can be a good tactic to reduce the cost of credit card debt. Some things to consider"
I have credit card debt of about $5000  That's the answer right there. You told us the 401(b) has no match. The next highest priority would be credit card debt that's costing you interest. You didn't mention the rate on the card, I'm assuming it's 8% or more.  As far as your balance sheet (the 'bottom line') is concerned, pay off a 10% debt is the same as earning 10% on your money. If anyone promises you a higher return with a different investment, I'd run the other way. We hope the market, i.e. the US stock market, as measured by a broad index, say the S&P 500, will return 8-10%/yr over the long term, but this isn't guaranteed. Paying off that credit card will save you the interest every year, and free up the payments to invest elsewhere.  In response to Marlene's comment - Crazy? No. Human nature and emotion is what it is. I honestly don't know how to address some of it. Years ago, I was in a similar situation with a reader who had a $5000 'emergency' account, yet had $5000 in credit card debt. I had a tough time getting my head around why it wasn't obvious this made no sense. In your case, I might suggest you pay the card down to below $1000 and have the credit line reduced. Paying high interest on $5K makes no sense at any point in one's life. At least a 20-something can dig his way out and learn a lesson. A pre-retiree shouldn't be throwing this money away. To confirm: you say you have credit card debt of $18,000 with min. repayment of $466.06, plus on top of this you are also paying off a car loan and another personal loan. From my calculations if your monthly interest on your credit card is $237, the interest on your credit card should be about 15.8% p.a. Is this correct? Balance Transfer If you did a balance transfer of your $18,000 to a new credit card with 0% for 14 months and keep your repayments the same ($466) you would have saved yourself a bit over $3020 in interest over those 14 months. Your credit card balance after 14 months would be about $11,471 (instead of $14,476 with your current situation). If your interest after the 14 months went back to 15.8%  you would be able to pay the remaining $11,471 in 2.5 more years (keeping repayments at $466), saving 10 months off your repayments and a total of $4,781 in interest over 3 years and 8 months. The main emphasis here is that you are able to keep your repayments at least the same so you are able to pay off the debt quicker, and that your interest rate on the new credit card after the 14 months interest free is not more than your current interest rate of 15.8%. Things you should be careful about if you take this path: Debt Consolidation In regards to a Debt Consolidation for your personal loan and credit card (and possibly your car loan) into a single lower interest rate loan can be a good idea, but there are some pitfalls you should consider. Manly, if you are taking out a loan with a lower interest rate but a longer term to pay it off, you may end up paying less in monthly repayments but will end up paying more interest in the long run. If you do take this course of action try to keep your term to no longer than your current debt's terms, and try to keep your repayments as high as possible to pay the debt off as soon as possible and reduce any interest you have to pay. As you already have you credit card and personal loan with CBA talk to them to see what kind of deal they can give you. Again be wary of the fine print and read the PDS of any products you are thinking of getting. Refer to ASIC - Money Smart website for more valuable information you should consider before taking out any debt consolidation. Other Action You Can Take If you are finding that the repayments are really getting out of hand and no one will help you with any debt consolidation or reducing your interest rates on your debts, as a last resort you can apply for a Part 9 debt agreement. But be very careful as this is an alternative to bankruptcy, and like bankruptcy a debt agreement will appear on your credit file for seven years and your name will be listed on the National Personal Insolvency Index forever. Further Assistance and Help If you have trouble reading any PDS, or want further information or help regarding any issues I have raised or any other part of your financial situation you can contact Centrelink's Financial Information Service. They provide a free and confidential service that provides education and information on financial and lifestyle issues to all Australians. "Credit Cards typically charge interest on money you borrow from them.  They work in one of two ways. Most cards will not charge you any interest if you pay the balance in full each month.  You typically have around 25 days (the ""grace period"") to pay that off.  If that's the case, then you will use your credit card without any cost to yourself. However, if you do not pay it in full by that point, then you will owe 19.9% interest on the balance, typically from the day you charged the payment (so, retroactively).  You'll also immediately begin owing interest on anything else you charge - typically, even if you do then pay the next month the entire balance on time.  It's typically a ""daily"" rate, which means that the annual rate (APR) is divided into its daily rate (think the APR divided by 365 - though it's a bit different than that, since it's the rate which would be 19.9% annualized when you realize interest is paid on interest).   Say in your case it's 0.05% daily - that means, each day, 0.05% is added to your balance due.  If you charged $1000 on day one and never made a payment (but never had to - ignore penalties here), you'd owe $1199 at the end of the year, paying $199 interest (19.9*1000). Note that your interest is calculated on the daily balance, not on your actual credit limit - if you only charge $100, you'd owe $19.90 interest, not $199. Also note that this simplifies what they're actually doing.  They often use things like ""average daily balance"" calculations and such to work out actual interest charged; they tend to be similar to what I'm describing, but usually favor the bank a bit (or, are simpler to calculate). Finally: some credit cards do not have a grace period.  In the US, most do, but not all; in other countries it may be less common.  Some simply charge you interest from day one. As far as ""Standard Purchases"", that means buying services or goods.  Using your credit card for cash advances (i.e., receiving cash from an ATM), using those checks they mail you, or for cash-like purchases (for example, at a casino), are often under a different scheme; they may have the same rate, or a different rate.  They likely incur interest from the moment cash is produced (no grace period), and they may involve additional fees.  Never use cash advances unless you absolutely cannot avoid it." "As documented in MyFICO (http://www.myfico.com/credit-education/whats-in-your-credit-score/), there are several factors that affect credit scores. Payment history (35%) The first thing any lender wants to know is whether you've paid past   credit accounts on time. This is one of the most important factors in   a FICO® Score. As @Ben Miller mentioned, checking your credit report to determine whether or not late payments were reported to credit bureaus will give you a sense of whether or not this was effected. You mentioned several bounced payments, which certainly could have caused this. This would be my largest concern with a closed account, is to investigate why and what was reported to the bureaus, and in turn, other lenders. Also, since this has the highest impact on credit scores (35%), it's arguably, the most important. This is further detailed here, which details the public record and late payment effect on your score. Amounts owed (30%) Having credit accounts and owing money on them does not necessarily   mean you are a high-risk borrower with a low FICO® Score....However,   when a high percentage of a person's available credit is been used,   this can indicate that a person is overextended, and is more likely to   make late or missed payments. Given that this card was closed, whatever your credit limit was is now no longer added into your total credit limit. However, your utilization on that card is gone (assuming it gets paid off), depending on any other credit lines, and since you reported ""heavy use"" that could be a positive impact, though likely not. Length of credit history (15%) In general, a longer credit history will increase your FICO® Scores.   However, even people who haven't been using credit long may have high   FICO Scores, depending on how the rest of the credit report looks. Depending how old your card was, and particularly since this was your only credit card, it will likely impact your average age of credit lines, depending on other lines of credit (loans etc) you have open. This accounts for about 15% of your score, so not as large of an impact as the first two.  Credit mix in use (10%) FICO Scores will consider your mix of credit cards, retail accounts,   installment loans, finance company accounts and mortgage loans. Given that this was your only credit card, your loan mix has been reduced (possibly to none). New credit (10%) Research shows that opening several credit accounts in a short period   of time represents a greater risk - especially for people who don't   have a long credit history. This focuses on credit inquiries, which as you mentioned, you will likely have another either re-opening this credit card or opening another at some point in the future.  Regardless, paying off the rest of that card is a priority, as interest rates on average credit cards are over 13%, and often higher (source). This rate comes into play when not paying the balance in full every month, and also as @Ben Miller suggested, I would not utilize a credit card without being able to pay it in full. It can often be a dangerous cycle of debt." The implied intent is that balance transfers are for your balances, not someone else's.  However, I bet it would be not only allowed but also encouraged.  Why?  Because the goal of a teaser rate is to get you to borrow. Typically there is a balance transfer fee that allows the offering company to break even.  In the unlikely event that a person does pay off the balance in the specified time frame the account and is then closed, then nothing really lost. Its hard to find past articles I've read as all the search engines are trying to get me to enroll in a balance transfer.  However, about 75% of 0% balance xfers result in converting to a interest being accrued.  If you are familiar with the amount of household credit card debt we carry, as a nation, that figure is very believable. To answer your question, I would assume they would allow it.  However I would call and check and get their answer in writing.  Why?  Because if they change their mind or the representative tells you incorrectly, and they find out, they will convert your 0% credit card to an 18% or higher interest rate for violating the terms.  Same as if a payment was missed. From the credit card company's perspective they would be really smart to allow you to do this.  The likelihood that your family member will pay the bill beyond two months is close to zero.  The likelihood that a payment will be missed or late allowing them to convert to a higher rate is very high.  This then might lead to you being overextended which would mean just more interest rates and fees.  Credit card company wins!  I would not be surprised if they beg you to follow through on your plan. From your perspective it would be a really dumb idea, but as you said you knew that. Faced with the same situation I would just pay off one or more of the debts for the family member if I thought it would actually help them.  I would also require them to have some financial accountability.   Its funny that once you require financial accountability for handouts, most of those seeking a donation go elsewhere. This bit of marketing, like the zero-percent introductory rates some banks offer, is intended to make you more willing to carry a balance, and they're hoping you'll continue that bad habit after the rate goes back up. If you don't think you'll be tempted by the lower rate, yhere's no reason not to accept (unless there's something in the fine print that changes your agreement in other ways; read carefully). But as you say, there's no reason to accept ir either. I'd ignore it. Zero percent interest may sound great, but those deals often have extra margin built into the price to make up for it. If you see 0%, find it cheaper somewhere else and avoid the cloud over your head. If it's feasible, try to get one card down to zero balance, and preferably one of your cash-back cards.  Then keep that at zero every month (pay it off in full), and use it for your purchases as you describe above. The idea would be to get it so that you are not paying interest on your month to month purchases.  This not only reduces the 20% or whatever that you're paying on that balance, but also the 20% or whatever you're paying on those purchases - remember, a card you carry a balance on charges you interest on those purchases from the current month. If this isn't feasible (if these are all very high balance cards), then I suppose the way you're currently doing it would be okay, though I think you're overthinking things to some extent - but with 80% interest, if that's a significant pile of money, you may need to as clearly that needs to be tackled first.  I think it's mostly better for you to pay your day to day stuff out of pocket and not use your cards the way you are suggesting, but with the 80% loan(s) you may need to. The reason I say it's better not to use your card the way you suggest is that it is difficult to do properly and never get it wrong (i.e., never go over a balance), and it's also leaving you in the habit of using credit.  It doesn't help you budget necessarily, either.  Instead, set up a fully developed budget that includes all of those minimum payments and pay them.  Certainly once you have the > 50% debt handled, I would switch to this method (not using credit cards at all).