Use a Low APR Card to Consolidate Debt

If you have a lot of credit card debt spread across a number of different accounts, you might be thinking about whether you should consolidate those balances onto one card.

The benefits of doing so are obvious. First, you’ll essentially be taking the number of payments you have to worry about making every month and condensing it to just one, reducing the risk that one gets lost in the shuffle and reducing the risk that you’d get hit with penalty interest rates and fees, as well as the accompanying hit to your credit rating.

But second, and perhaps more importantly, you’ll also be putting yourself in a better position to pay off your debt more quickly. That’s because many offers for new credit cards now carry generous introductory offers that grant users 0 percent interest for some time after the account is open. Most fall somewhere between six and 18 months.

Therefore, if your financial goal is to pay down your debt more quickly, getting a 0 percent APR credit card will be a huge advantage, because it can give you as much as a year and a half to cut your balance without paying a cent in interest.

Of course, when moving debt to this card from other ones, you will almost certainly have to pay what is known as a balance transfer fee. Usually, this charge amounts to about 3 percent of the total value of the balance—for example, if you put $5,000 onto the new card from old ones, you’ll have to pay $150—but that is usually preferable to the ongoing interest charges you would face if you kept your balances on all your old cards instead.

And when opening such an account, you might also want to consider your plans for using it in the future. If you’re just using it as a means of reducing your outstanding debt, you might not be very concerned about the associated ongoing interest rate after your introductory offer expires. But if you plan to use it as you would any other card after that point, you should keep an eye on the ongoing APR. That’s because cards with 0 percent APRs to start typically carry higher ongoing interest rates than those that do not.

[Credit Cards: Research and compare low APR credit cards at Credit.com.]