Man are they popular!
0% balance transfer cards are a favorite among those carrying credit card balances, looking for reprieve from the high interest rates. The idea is simple, transfer the balances to a card with a zero percent interest rate introductory period (usually 12-18 months) and pay off the entire balance before the introductory period is up. Voila! You’ve managed to avoid a sh*t ton of interest.
Unfortunately, it doesn’t often turn out this way. Watch this video to give yourself the best chance of achieving the ideal outcome with a balance transfer card.
Transcript:
Your credit card balances got out of control and now you’re thinking of transferring your debt to a credit card with no interest for the first 12 or 18 months. Sounds good, but in order for it to work out, you have got to make yourself a promise.
As a financial coach, there are 3 main reasons I hear about why my clients have racked up credit card debt. Some people slowly but surely accumulated debt without paying much attention, some were hit with a series of unexpected expenses, and the third most common reason is that they or their partner got laid off. Whatever the reason they got into credit card debt, the first thing people ask is if a balance transfer card that has a no interest introductory period is a good idea. In some ways it almost seems too good to pass up. Like yeah, why wouldn’t you give yourself a break from paying interest and then pay off the whole balance before the introductory period is over? Seems like a no-brainer. But the credit card companies who offer these cards have statistics on their side – most people don’t pay off the balance before the introductory period expires, and that’s why the credit card companies end up making so much money off these cards.
Even if you know that, you might think, “yeah, but that won’t happen to me. I’ll be good, I’ll pay it off. The reason I got into debt is over and past and it won’t happen again. I got this!” While I love the positive, can-do attitude, I still strongly encourage you to make and keep this promise to yourself: that you will get financially fit right now even if that means having to hire a financial coach.
On an immediate level, you might need a coach who can help you keep your credit score high enough so that you qualify for a balance transfer card. If you wait until your credit is shot, you may not even have this as an option. But on a longer-term level, you’ll want to get financially fit and consider coaching because your money management skills, way more than your life circumstances, determine whether you get out of – and stay out of – debt. It can seem like the circumstances that led to your debt were beyond your control or just the mistakes of an immature person, but now that you’re older and wiser, you won’t continue that behavior. Not so fast. Money habits die pretty hard. They can be deeply ingrained in us because they stem from beliefs that you’ve had all your life. A financial coach, much like a therapist, can guide you to search your past to illuminate your present circumstances. You can shift and transform thoughts, beliefs, and feelings about money and your ability to handle it. I can hear some of you through this screen saying, lady, it’s just debt, it’s not that deep. But oh, yes it is. And if it’s not that deep, and it’s just a matter of learning how to manage money better, then you’ll want a financial coach to help you do that too, unless you’re a strong do it yourself-er and all you need is a book, in which case, I’ve got you covered. Take a look at my book by following the link in the description. But a coach, unlike a book, can help keep you accountable so that the debt goes to zero and never, ever returns.
Critically important is a coach’s ability to help you pay off debt and keep from racking up any more of it, is showing you how to plan for the unexpected. Of course a coach won’t be able to plan for every possible scenario in life, but most of what we think of as unexpected expenses are actually just unplanned expenses, that were absolutely predictable if we had just thought things through a little bit better. For example, you can expect that your car will have an issue, maybe it’ll break down or you’ll get a parking ticket or two. So when those things happen, they’ll be unexpected but you could have seen them coming if you thought about it – not exactly when but that it would happen. A good financial coach will help you think through all the likely expenses so that you’ll see what’s ahead and you can deal with them painlessly. If you drive a car, you know at some point you’ll need new tires, but most people I know don’t budget at all, and if they do, they don’t budget for an expense that’s coming up in months or years, but they can. For my car, I’ll spend about $1500 for new tires and I’ll need a new set in about 3 years so if I create a budget that accounts for tire costs in my maintenance expenses, then that $1500 expense will not feel like it came out of nowhere and put me into debt when I need to shell out that money one day. It’s only about a dollar a day or $30 bucks a month if I start planning for it now. So if I leave that amount in my account for when I need the tires in a few years, I can pay for the tires no problem, without paying any interest on them. Again, not every cost can be anticipated, but most can be. If you’re overwhelmed by the idea of thinking through every cost like that, then that’s one more reason to get a financial coach. You’ll see for yourself how good it feels to be reasonably prepared for expenses coming our way.
Another reason to get financially fit is so that you can take control of your spending and make sure that you’re not overspending. The best way to do this is with a values-based budget and learning how to track your spending to see if you’re sticking with your budget. If you feel some kind of way about budgeting, then find a financial coach or someone who helps you see how budgeting, done right, gives you much more freedom than it takes away. A budget is no more of a repressive tool that deprives you of your happiness than lane lines on the freeway. They just guide you along your path so that you get to your destination with a lower likelihood of crashing. Find a way to take the boo-hoo out of budgeting, because if you’re climbing out of debt, you absolutely need a budget. A budget is easier to maintain if it represents your values so get yourself a values-based budget ASAP. You also need a debt repayment plan incorporated into your budget. You need to know how much you can put towards debt while still having enough to cover the rest of your living expenses.
Now, coming up with a plan is half the battle, the other struggle is sticking with it. For that, you’ll need to keep your finances organized and systemized with a process for handling your mail and bills so everything gets paid on time. The last thing you need when you’re trying to pay off debt is to incur late fees. Such a waste. Creating an organizational system is a critical piece of financial fitness that almost everyone skips over. Most people think that setting up a system means putting everything on auto-pay, but this is dangerous for many people, especially for those who accumulated credit card debt simply by being mindless with their money. Auto-pay makes overspending easier because you don’t become aware of its consequences until it’s way too late. You want a system that helps you keep an eye on your money, not turn a blind eye to it. The system doesn’t need to be anything fancy, and can even be done with a mail tray, some folders and the calendar in your phone, honestly that’s all I use.
Getting financial fit is totally doable and an absolute must if you want to win with a zero percent interest balance transfer card. Without it, you set yourself up for repeating the circumstances and mistakes in your past that led you here in the first place. While I’m sure you have every intention of paying off your debt before the interest kicks in, please remember that intention without a plan or ability to see that plan through is no more likely to happen than winning the lottery. And debt becomes a lifestyle. If you’re in debt for too long, it becomes sticky and pulls you back into its grip even if you manage to pay it off. Some people will pay off impressive sums of debt only to go back into debt because they developed the skills to pay off debt but not the ones that prevent it in the first place. Becoming financially fit is your best chance to fending debt off forever by developing both sets of skills at the same time.
Make this promise to yourself before you transfer your balance to that new card and I’ll catch you in the next video.
