How a Balance Transfer Credit Card Can Help with Summer Childcare Expenses

October 5, 2019

By Sherry Keyles

Summer is here and so are childcare expenses. While children are off from school, most parents still have to work, leaving them to need childcare. How do parents to pay for it? For more than half of parents, the answer is a credit card.

Summer Childcare Costs

According to a recent Bankrate survey, 59% percent of parents say they will use a credit card for summer with 35% saying they will pay the expense off over time as opposed to paying off the credit card immediately.

The survey also found the cost of summer childcare per child us $998 but more than 30% said they would be paying more than $2,000 per child.

While paying for childcare with a credit card is a good option financially and can help you earn top rewards, you also want to avoid falling into debt. However, if your credit card has high interest rates, debt might seem inevitable.

One option to help parents pay off the childcare expenses without having to pay high interest - a balance transfer credit card.

How a Balance Transfer Credit Card Works

While balance transfers can be helpful in paying off your debt, you need to commit to getting out of debt to be successful. Otherwise, you risk putting yourself in more debt.

A balance transfer credit card with an introductory 0% APR enables you to transfer your high-interest credit card debt to a new card. Essentially, a balance transfer is a way to pay off your credit card debt with another credit card. You can also consolidate balances if you use more than one credit card to pay for childcare.

The main reason to get a balance transfer card is to avoid paying interest for a specific period of time. With introductory periods ranging from 12-21 months, you not only save hundreds in interest but you can also pay the balance off much faster as more of your payments go towards the principal.

To get the maximum benefit from the balance transfer credit card, you must pay off the balance before the introductory period ends. Otherwise, the card’s standard interest rate (also known as”go-to” rate) - which could be as high as 26% - will apply to the remaining balance.

What to Consider When Selecting a Balance Transfer Card

A balance transfer credit card can be a great choice for paying off debt but there are a few things you need to consider to ensure you get the right card for your needs.

Length of 0% APR period and “Go-To” interest rate
- When the promotional period ends, the standard interest rate will apply to any balance you have remaining. The rate is usually based on your creditworthiness and can be as high as 26%.

Balance transfer fees
- Most cards charge a one-time fee on the transferred amount - usually 3% or 5%. Make sure to factor this fee into total debt amount. A few cards waive the balance transfer fee for a limited period of time, which can help if you are transferring multiple balances. Depending on your debt amount, the savings from the introductory offer can offset the fees.

Credit score
- balance transfer cards generally require very good to excellent credit to qualify for 0% APR offers. In some cases, you may qualify for an offer but have a lower balance transfer limit, which can be a problem if your debt is higher than the limit. Check your credit score before you apply.

Terms of 0% APR Offer
- Read the fine print. Each introductory offer comes with certain terms and conditions you must meet in order to keep the rate intact. For example, if you make a late payment, some cards will immediately cancel the 0% APR. In addition, fees can be different for every card. The Citi Simplicity Card never charges a late fee while others will charge a late fee for your first offense.

Balance transfer limit
- The limit to the amount you can transfer varies by card. Typically, you can transfer 70% to 100% of your maximum credit limit. If your debt is much bigger than your limit, a balance transfer card may not be your best option.

Eligible issuers and cards
- Generally, you aren’t allowed to make balance transfers between cards issued by the same bank or card provider.

Balance transfer fee
- most cards charge a one-time fee on the transferred amount - usually 3% or 5%. Make sure to factor this fee into total debt amount. A few cards waive the balance transfer fee for a limited period of time, which can help if you are transferring multiple balances.

Other card features and fees. You shouldn’t make purchases with your balance transfer card as your primary goal is to pay down your debt, not add to it. However, if you plan to keep the card once you pay off the balance, you may want to consider rewards, fees (annual, foreign transaction, cash advance,  etc.) and other features.

Types of debt you can transfer - In addition to credit card debt, some cards enable you to transfer other debts including auto loans, student loans, personal loans, and other installment loans.

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