Reduce Your Debt | The Simple Trick to Dropping Your Interest Rate to 1%

This post explains how to get the absolute lowest interest rates on your debt. Be careful, if you don’t have self-control, you might be tempted to rack up more debt after you implement this plan. Obviously we take no responsibility from anything that might happen to you as a result of following this advice. Here it is!

Balance Transfer Rates

The lowest debt interest you can get is almost ALWAYS in the form of promotional balance transfer rates on credit cards. When you first sign up for a new credit card, the card company will often offer you a Promotional Balance Transfer Rate. These rates typically last for 6 months to a year and usually fall into the range of 1% to 6%. At the time of this writing, MBNA Canada happens to be offering a balance transfer rate of 0% interest for 15 months (with the fine print it ends up being 1%). This is an incredible offer and could probably help almost everyone in paying off some of his or her consumer debt. PC Financial also offers low interest on balance transfers at about 1.9% for the first 6 months (not bad either.) Capital One will usually give you 5.9% for around 3 years.

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How Balance Transfers Work

Balance transfers simply let you pay off one credit card with another. If you are carrying high interest debt on one card, you can transfer the debt to another card at a much lower rate (i.e. 2%) You new card company loves when you transfer them debt and is willing to give you a great rate because they think that after your low interest period (of say 6 months) is over, you will have to start paying them the usual high rates of about 20%. You have to be smarter than that, by the time your low interest rate disappears, you should try to have your debt paid off – if you still have some left, you should be ready to transfer it to a new card at an equally low rate. I have a friend in the banking industry who tells us stories about rich clients (million plus net worth) who still float $50,000 in low or no interest balance transfers. He says they simply don’t care to pay it back because it doesn’t cost them anything to keep it – and often times they can use that money to get a far better return than the 2 or 0% they pay on the debt.

How to Get Access to Balance Transfer Opportunities

As mentioned above, the usual way to get access to a promotional balance transfer rate is to just sign up for a new credit card that is offering a promotional rate to new customers signing up. A second method of getting a low balance transfer rate is by threatening to cancel one of the cards you already have. If you have a card with no balance on it (or a balance that you can easily pay off) call your credit card company and tell them you want to close the account unless they offer you a promotional balance transfer rate. They do not want to lose you as a customer, and as we mentioned before, it is often in their favor to offer you the rates since they don’t think you can pay off the balance before the rate goes back to 20%. Remember, you should try to pay off the balance on the card before you threaten to cancel – if you have a $5000 balance with this company, they probably will not believe you when you say you’d like to close the account.

How to Really Take Advantage of Balance Transfers

Now that you understand balance transfers, check out our article on how to really take advantage of them: Take Full Advantage of Balance Transfers

The Lowest Balance Transfer Rate Credit Card as of July 25 2010

Currently the absolute lowest balance transfer rate you can get on a Canadian credit card is 0% for 15 months. As it turns out it’s actually 1% for the 15 months because you have to pay 1% on transferred amount at the time you transfer it. You can transfer money out via convenience check or just call them up and have them transfer it to your checking account – or you can do the usual and call them to have them transfer the cash to another one of your credit cards (so long as the other card isn’t an MBNA one)

This is one of the best rates we have ever seen for balance transfers and one of the longest grace periods available. Additionally, the rate applies not only to balance transfers, but also to the Credit Card Convenience Cheques. Realistically there is no reason not to take the cash from the card and invest it in a savings account. Realistically most of us have high interest debt that we should shift to a card like this and pay off within the 15 month grace period.

The Card is the MBNA Platinum Plus card – check it out here: http://www.mbna.ca/popular_cardList.html