2 Credit Card Debt Tips That Could Save Your Wallet

By Nathan Hamilton Markets Fool.com

Many cardholders use high-quality balance-transfer credit cards to help pay off their high-interest credit card debt faster. This is possible since balance-transfer credit cards include 0% introductory APR offers spanning anywhere from 12 to 21 months.

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But cardholders taking advantage of this strategy need to know a handful of essentials that can help cut their out-of-pocket costs. In the following video segment, Motley Fool analysts Michael Douglass and Nathan Hamilton discuss two balance-transfer credit card essentials and how overlooking crucial information could hit your wallet.

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Michael Douglass: Let's talk balance-transfer credit card facts, a couple things that could really be of big benefit to consumers. Let's talk about the transfer balance.

Nathan Hamilton: We'll look at two balance-transfer credit card essentials. The first one to know is your balance transfer. The amount that you take from one card and move to the new card for the 0% introductory APR cannot exceed the credit limit. Now, it's important to pay attention to this, because there are different limits on your credit cards. There's a credit card limit that you can borrow on credit. There's a cash advance fee limit. Those details, there's a lot of information out there. It's important to focus on it and say, "OK, maybe I've got $10,000 worth of debt, but my credit card limit for this specific balance transfer card is only $5,000." Maybe think about, "OK, I'll transfer one balance here, pay off the interest there." Even in some scenarios, it may make sense to apply for a number of balance-transfer credit cards to get that 0% offer.

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Douglass: Sure, absolutely. Then, of course, the average balance transfer APR is about 18.49%.

Hamilton: Yep. Super high.

Douglass: Yeah. That's all after the promo period. You're safe until then.

Hamilton: Yeah, that's No. 2, is essentially looking at your full scenario. Say, in our example, that you've got a $10,000 balance. Maybe you have a $10,000 credit limit on the new card. If you transfer all of that over and you're only able to pay down $6,000 during that promo period, you've still got a significant amount of time that you're going to be incurring interest. It may be higher than what you have currently, or it may be lower. It's just something worth accounting for. Maybe the best practice is transfer the balance to the 0% card, take advantage of it, save 15 months, 21 months. Then, after that, maybe transfer it to another card. There certainly are, I don't know if you would call it snowballing, but essentially moving to different cards to pay down that interest and avoid it altogether. Pay down your debt and avoid interest altogether.

Douglass: Yeah. Finally, let's talk about the Schumer box and what exactly it is. You explained this to me just two minutes ago. I'm curious.

Hamilton: It's a term that most people won't know. When you're looking at the details and the cost of a credit card fee, they're presented on an application page in a standardized format. This is part of legislation coming out of the 2008 financial crisis. Chuck Schumer, political figure, introduced legislation that requires credit card companies to list out the costs in a very standard, easy-to-read format. There's really no reason for people to not understand what they're getting into with credit cards. For our specific essentials that we're talking about here, that is one thing you want to pay attention to -- the Schumer box.

Douglass: Yeah, absolutely. There's all that fine print. It's all right there.

Hamilton: It is fine print, yes.

Douglass: Absolutely. Well, cool. We've got a lot more information about credit cards, about the Schumer box, about what to look for and what not to look for.

Hamilton: So much Schumer box.

Douglass: So much. What to look for and what to avoid at fool.com/creditcards. We've got our picks of the best balance-transfer credit cards there and also five tips to increase your credit score over 800. Certainly a rare thing for most Americans, so something that should be useful for a lot of people. Check us out there. We'll look forward to seeing you on fool.com. Thanks, Nathan.

Hamilton: You're welcome.

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