Balance transfer can help reduce new grad's card debt burden

To Her Credit columnist Sally Herigstad
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for, and also wrote for MSN Money, and, and has guested on Martha Stewart Radio and other programs.

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Question Dear Sally,
I have just graduated with an undergraduate degree. In the few months I spent between graduation and finding a full-time job, I racked up a balance of about $4,500 on my American Express card. I can only pay a little more than the minimum each month, and with the finance charges I’m paying, I can’t seem to get ahead.

I have recently been researching balance transfers. I have a 722 credit score, and I have a history of 100 percent on-time payments. I am using 21 percent of my current total available credit, which is about $20,000 between my three credit cards. I have American Express, Banana Republic and Victoria’s Secret cards. I’d like to close the Victoria’s Secret card.

Do you think it would be a good idea to open the Citi Diamond Preferred card with the 21 months of 0 percent interest and transfer my AmEx balance to that?

I’m just trying to investigate my options to help myself stay afloat with this massive amount of interest I keep racking up on my AmEx (the card I really want to keep). – Christina


Dear Christina,
Transferring credit card balances to a 0 percent introductory interest card can be a great strategy – if you do it right.

I see you’ve done your research. The Citi Diamond Preferred card offers 21 months at 0 percent interest, both on balance transfers and purchases. It has no annual fee. It does have a transfer fee of $5 or 3 percent of the amount transferred. If you transfer $4,500 to this card, $135 is then tacked on to what you owe. You may decide that’s worth it, but it’s important you understand and aren’t surprised when you see it appear on your bill.

Some credit cards offer a balance transfer with no fee as a promotion. Chase Slate offers balance transfers with no fees for 15 months for those who qualify, as long as the transfer is made within the first 60 days of having the card. After that, a balance transfer fee of 5 percent is added to the balance.

After you decide which card you prefer, you should consider whether you qualify for it. To get the Citi Diamond Preferred Card, you must have “good to excellent” credit. If you’re checking your FICO score, that should be about 670 and higher. At 722, you are comfortably in the “good” range of 670 to 739, according to credit bureau Experian.

That doesn’t mean you are guaranteed to get this card, however. You’ll have to fill out an application, and the bank will consider other factors, such as your income, to determine whether to extend credit. Don’t close your other cards until you are approved for the new card, or you may ding your score by shortening the length of your overall credit history or mess up your debt-to-available credit ratio by removing that credit line if you are carrying balances on your other cards.

If the bank gives you a card, but it comes with a lower credit limit than you need to transfer all your high interest credit card debt, go ahead and request a higher limit. Sometimes all you have to do is ask. If you are unsuccessful, transfer as much as you can.

Once you have your new card, and you’ve transferred your balance to it, the real work begins. It’s easy to think 21 months is a long time when you have almost two years to pay it off. Time passes swiftly during an introductory credit card period. Determine how you will pay off the entire balance before the deadline, which will be about $221 a month for 21 months on a $4,635 balance ($4,500 plus the balance transfer fee of $135), provided you don’t add to the balance with any new purchases. If you receive extra money while you’re working on paying off your debt, such as from a bonus or tax refund, apply that as well.

Closing the Victoria’s Secret card after you receive your new card is a good idea. Any department store cards you don’t really need are just a temptation to spend money.

Congratulations on getting a job just a few months after graduation! Good luck as you work on your financial goals and your career goals at the same time.

See related: 9 things to know about balance transfers, 0-percent balance transfer payoff calendar

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Updated: 11-24-2017