Debt payoff

It depends mostly on whether you can repay the balance before a promotional rate ends. If you can, a 0% balance transfer usually costs only its fee. If the balance is too large to clear in the promo window, or you want a fixed payment and end date, a consolidation loan at a rate well below your cards may cost less overall. Compare both by total cost at the monthly payment you can actually keep up.

Balance transfer fees are typically a percentage of the amount moved, often in the range of 3% to 5%, sometimes with a minimum dollar amount. On a $10,000 transfer, a 3% fee is $300, and it is usually added to the new card's balance on the day of the transfer. The fee and its terms appear in the card's rate table, so check it before you apply rather than after you are approved.

The debt avalanche sends your extra money to the debt with the highest interest rate first, while the debt snowball sends it to the debt with the smallest balance first. Both pay at least the minimum on every debt and roll each paid-off debt's payment into the next target. The avalanche minimizes interest; the snowball delivers quicker early payoffs. With the same budget, the two often finish within a month or two of each other.

The avalanche saves the same or more interest whenever the budget and debts are identical, because each extra dollar goes to the most expensive balance. How much more depends on the spread between rates and the size of the balances. In our four-debt example with an $800 monthly budget, the avalanche costs $4,403.32 in interest and the snowball $4,541.83, a difference of $138.51, with both finishing in 30 months.

Most cards divide the APR by 365 to get a daily periodic rate, then apply it to your average daily balance for the billing cycle and multiply by the number of days in the cycle. At 24% APR the daily rate is about 0.06575%, so an average daily balance of $2,066.67 over 30 days produces about $40.77 of interest. Your card agreement names the exact balance method, so check it if your numbers differ.

Usually not on purchases. If your card offers a grace period and you pay the full statement balance by the due date, new purchases are not charged interest. The grace period typically does not cover cash advances or balance transfers, which often start accruing interest right away. If you carry any balance past the due date, you generally lose the grace period until you pay in full again, sometimes for more than one cycle.