Use A 0 APR Balance Transfer To Pay Large Loans

Mortgage or HELOC

Even if you have a low interest rate on your mortgage or HELOC, it probably isn’t 0 percent APR, which is what many balance transfer cards offer. So it’s natural to consider moving all or some of your mortgage or HELOC to a 0 APR balance transfer card. But transferring a mortgage or HELOC to plastic is risky, so you need to carefully consider all the ramifications.

1. Higher interest rate could kick in — The 0 APR balance transfer is just an introductory rate. After a certain period, usually between 6 and 18 months, this rate ends and a higher interest rate kicks in. The higher rate will likely be more than your current mortgage or HELOC interest rate.

1. You lose the mortgage tax deduction — Once you turn your mortgage or HELOC into credit card debt, you no longer get the tax deduction.

1. How to decide — If you are 100 percent sure that you can pay off the transfer balance before the introductory period ends, you might want to consider using a 0 percent APR balance card to pay some or all your mortgage balance or HELOC. Ask yourself whether you can stick with your payment plan even if you lost your job or were in an accident. If the answer is “no,” then you probably should not take the risk.

Furniture Loans

If you have a 0 percent APR furniture loan from a retail store, you might want to switch your balance to a 0 percent APR balance transfer card if the terms were right.

1. Harsh penalties — Typically, if you miss or are late with a payment when you use a 0 percent APR furniture store card, you lose the 0 percent deal right away, and you will then start paying interest. But the kicker is that you pay interest going back in time to the original purchase.

1. Not as risky — If you miss or are late with a payment using a 0 percent APR balance transfer card, interest will still kick in at that point, but only going forward, not retroactively as the store credit card typically would.

1. Consider balance transfer fees — You might have to pay a balance transfer fee to move your balance from the furniture store card to the balance transfer card. In that case, it might not be worth it.