Using zero-interest credit cards to help pay off debt

Credit cards are notorious for getting people into debt. Strangely enough, it's also possible to use a credit card for getting out of debt, but you have to be committed to doing it.

If your credit rating is strong, you probably routinely get offers for a "Zero Interest Introductory Rate" on new credit cards. These offers are usually legit (read the full agreement to be sure). You sign up for a new card, and pay no interest on the balance for some number of months. Making a balance transfer to an interest-free credit card could save you hundreds of dollars in interest, if you have the discipline to pay it off within the allotted time.

Read the fine print

It's important that you take the time to understand the terms of the offer. Very often, balances on these introductory offers not only begin accruing interest after the grace period expires, they also charge back interest on the balance at the regular rate for all the no-interest months. Leaving a balance on a no-interest card can backfire on you if you're not careful. This is why the credit card companies make these kinds of offers -- they are counting on you to fail, and it's up to you to play the game in your favor.

Another piece of fine print to study is the interest rate charged on new purchases. Usually the zero interest rate applies only to the balance you've transferred, not to new charges.

If you're interested in trying this debt repayment strategy, the first thing you'll want to do is ensure that you're prepared. Can you really pay off your debt consistently, without accruing any new debt? To find out, try setting up a debt snowball payment and making your payments regularly. If you can do it for three months without taking on any new debt, you're probably ready to make a real commitment to paying it off. Now's the time to make your balance transfer.

How to choose the best credit card

The number of interest-free months varies widely from offer to offer. You may see offers for anywhere from three months to 16 months of "deferred" interest. Obviously, the longer zero-interest period you can get, the better off you'll be. Even if you expect to pay off the debt within six months, you want as much zero-interest time on your new credit card as you can get.

You'll also see huge variations in the interest rate you're expected to pay after the introductory period. Unless you are confident you won't carry a balance on the new card once you've paid off your debt, you may want to choose a card with a low regular interest rate.

Other considerations include the penalty rate if you miss a payment, the credit limit on the card and the upfront fee for making a balance transfer. This is typically 3 percent of the total balance transfer. If it's more, keep looking for a better offer.

Your credit rating

Don't close your old credit account when you open this new one. Having open lines of credit can help your credit rating. Just be sure to stop using the card. A visual reminder can help you do this. Your goal here is to eliminate your debt, not just move your debts around like a shell game.

• Get started saving by finding the best savings account now
• See all articles