I’m a big proponent of zero-interest credit cards. I use them to pay off large amounts I may have charged to one of my credit cards. (For example, I did $6,000 worth of home repair two years ago and am still paying it off with a zero interest card) And why not? It’s zero interest. I can keep paying as long as I want without incurring any more interest debt (which is the worse debt of all). Granted, yes, some cards have a transfer balance fee (in my case the transfer fee was waived), somewhere between 3% to 5% on the outstanding debt total. Either way, however, IMHO, zero interest credit cards are good for your bottom line and cash flow. Your cash stays in your investments and technically you are using their money instead of your own.
The corona pandemic has changed everything when it comes to zero interest balance transfer credit cards. (click here)
Banks are getting tough about lending money, especially if they’re not going to earn interest on it. According to an April 2020 Federal Reserve survey, in the first quarter of the year, banks tightened standards on credit cards, including terms on credit limits and minimum required credit scores.
“Credit card balance transfer offers often require excellent or good credit for consumers to acquire them,” says John Cabell, director of banking and payments intelligence at J.D. Power, says in an email. “But during the pandemic, that has become more challenging as card issuers have reduced their balance transfer offerings and are monitoring consumer debt eligibility ever more carefully during the economic downturn.”
Some credit card issuers have eliminated balance transfer offers almost entirely. Chase, Bank of America® and Discover all stopped accepting online applications for their primary balance-transfer cards. So even if you have good credit (a FICO score of at least 690), many offers simply aren’t available now.
In other cases, rewards credit cards that once came with 0% introductory APR periods for both purchases and balance transfers have dropped the option for transfers. These include popular cash-back cards from Capital One, Chase and American Express.
What’s a person to do? Start paying off your zero balance transfer card ASAP before the offer expires. Which is exactly what I am in the process of doing. I got my $6,000 down to $2,500 and I have five more months left before the zero interest rate expires. That means I have to cough up $500 a month to get the balance down to zero in time! There’s no way I should take a chance and see if I qualify for another zero interest balance transfer card in a few months, despite my having a high FICO score. Sure, I can take the money out of my savings account and be done with it. As I said, I’d rather use their money than mine. And we all know that once we take money out of our savings account, it’s super hard to get that money back in there.
Life, as we used to know it, is going to get harder and harder and harder as this pandemic continues to rage. Every day a plethora of businesses fail, more and more people lose their jobs, prices for almost everything (especially groceries) keep rising and it has consistently gotten much harder for any and all of us to keep our heads above water. There isn’t even a guarantee that Social Security is going to stay solvent. That is why, IMHO, a savings account is more important than ever (provided the dollar doesn’t collapse!)
The best advice any of us can use right now is to start paying down our debt, if possible. Your best bet is to start with secured loans, such as car loans, student debt, mortgages, equity lines of credit and pay them down as much as possible. Should you default on a credit card, there isn’t much the credit card companies can do to you. Sure they can take you to court and garnish your income BUT if you’re not making any money, they can’t get blood out of stone. To the best of my knowledge, they can seize your assets and they can put a lien on your home (after they sue you). All of that takes money. On the credit card company’s part. Odds are if there are enough defaults, they will just move on. I wouldn’t, however, advice anyone to take that chance. Call your credit card company instead and work out a deal. Look into a personal loan also. If all else fails, just pay as much as you can and hobble along as best you can. Cut your expenses, prioritize your debt and try to make more than the minimum monthly payment.