Dear Clever Credit,
I’m 20 years old with about $5K in credit card debt on a Chase Sapphire Preferred® Card. I have a Citi card I just got with the ability to do a balance transfer. I’ve never done one, but I know it has zero interest availability until December. Would this be a good idea to cut down on my debt and not pay interest?
Signed,
Young and In Debt
Dear Young,
A balance transfer credit card could be a great idea for you. But probably not with the Citi card you have now. This is because you’ll only have about five months to pay down $5,000 before the regular annual percentage rate kicks in. Now, if you can afford making $1,000 in credit card payments every month, more power to you. But I’m going to guess that’s not the case.
If you’re comfortable with applying for a new credit card, I’d recommend applying with the intent of transferring a balance. There are quite a few out there with lengthy introductory periods. If you look at the Wells Fargo Reflect® Card, for instance, it has a 0% intro APR period of 21 months (after that, 17.24%, 23.74%, or 28.99% variable APR). So that means you’d pay about $238 a month to pay off the balance. It also has no annual fee, so you don’t have to worry about that. See Rates & FeesBut say you go with another Citi card. Now, I’m not sure which one you have, so I’ll recommend a couple. The Citi® Diamond Preferred® Card offers a 21-month 0% introductory APR (a variable APR of 17.24% to 27.99% applies after that), so you’d pay the same monthly amount of $238. It also has no annual fee.
Or you can try the Citi Double Cash® Card. This one has a 0% introductory APR window of 18 months (18.24% to 28.24% (variable) APR after that), so it’s a little shorter. You’d have to pay about $278 a month to pay off your balance — so a $40 difference. What’s good about this option, though, is that the Citi Double Cash® Card also offers rewards (with no annual fee), which the other cards do not. So you can use this card after you finish paying off your balance. See Rates & Fees
You earn 2% cash back with the Citi Double Cash — 1% when you buy and then 1% after you pay. So you can use this card to help you manage your spending power: You only get the most rewards after paying off your balance. This could help to ensure you don’t let your balances get too high again.
You’re young, so now is a great time to make sure you give yourself good money habits. Try not to let your credit card debt get away from you. I know it’s a slippery slope (speaking from experience), but it’s hard to come out from under it when it gets to be too much.
Treat your credit card like your debit card and only use it when you know you have the cash to back it up. What I recommend right now as well is to put a pause on your credit card spending until you can pay off this balance. That way, you’re not racking up new debt while trying to pay the old debt.
You got this!
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Clever Credit: I’m 20 and Have $5K in Credit Card Debt. What Do I Do? originally appeared on usnews.com
