Don't Let Compounding Interest Work Against You
"My wealth has come from a combination of living in America, some lucky genes, and compound interest." - Warren Buffet, World's 2nd Richest Man
The reason rich people get richer and others fall short is that the rich make compounding interest work for them, not against them.
Paying credit card interest that compounds daily is one of the most wasteful things a person with excellent credit can do. It is the exact opposite of what Warren Buffet would do. It is the equivalent of lighting money on fire.
Consumers with average credit or worse really have no choices. They are stuck paying daily compounding interest on their credit card debt, making them a little bit poorer every morning when they wake up.
However, it is a completely different story if you have excellent credit. Banks want people like you as their customer and they extend 0% introductory rates on balance transfers to lure you in.
One standout balance transfer card worth noting is the BankAmericard® Credit Card. This card offers an ultra long 0% introductory rate on balance transfers that lasts 18 billing cycles. After the 18 month introductory period, cardholders pay 11.74% - 21.74% variable APR on purchases and balance transfers. By transferring your high interest debt to the BankAmericard® Credit Card, you can avoid paying interest until late in the summer of 2018. Hopefully, this will provide you with time to significantly pay down your outstanding balance without having to pay compounding interest.
Like 99% of all 0% balance transfer credit cards, the BankAmericard® Credit Card charges a standard 3% balance transfer fee (with a minimum of $10). This nuisance fee essentially amounts to 2 months of interest charges at a 15% interest rate. Should this be a deal breaker? Unless you can pay back your high interest balances in the next 2 months, certainly not.
For example, if you have $2500 of debt at a 15% interest rate & pay $100 monthly, your interest bill during that period will be $421. If you transfer that balance to the BankAmericard® Credit Card, your total bill will be $75 for the 3% balance transfer fee. That’s $346 in savings.
If that debt was $5,000 at a 15% interest rate & you paid $100 every month, your compound interest expense skyrockets to $1048 during the 18 billing cycles you could have been paying 0% interest. With the BankAmericard® Credit Card, your total bill for the next 18 billing cycles would be the 3%, $150 balance transfer fee, saving you $898. Clearly, paying a 3% fee is far superior to spending hundreds paying a double digit interest rate.
If your credit wasn’t good, you would have no choice but to pay this. But bad credit isn’t your problem. Paying compound interest is. And thus, for just about any credit card debt carrying consumer with excellent credit, transferring balances to a credit card like the BankAmericard® Credit Card is a no brainer.
Editorial Note: This content is not provided by Bank of America. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by Bank of America.
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