Pay off college debt with free credit cards

By Francine Huff

If you're just starting out in the work force, you may be concerned about establishing good credit. You may already have thousands of dollars in student loans and run up other bills, so it's important that any financial products you sign up for won't add to your debt.

Many recent graduates turn to credit cards to buy furniture, a wardrobe for work, and other items they need to strike out on their own. Before signing up for a credit card, do your homework to find one that offers a zero percent interest rate.

Graduating with credit card debt

Graduating from college with thousands of dollars in debt from student loans and credit cards isn't uncommon these days. A 2009 Sallie Mae study found that 84 percent of undergraduates had at least one credit card and that half of students had four or more credit cards. Seniors graduated with average credit card debt of $4,100, up from $2,900 in 2004.

Why get zero interest credit cards?

Getting a credit card with a zero percent rate is almost the same as getting a credit card for free -- at least to start. Some cards may offer a zero percent rate for purchases and balance transfers, while some offer no interest only for transfers.

Having zero interest means you don't pay any interest even if you carry a balance from month to month, so you're borrowing money for free. However, make sure that any zero percent credit cards you sign up for don't have an annual fee.

How can I get a Zero percent balance transfer credit card?

Have you been diligent with making credit card payments on time? A strong payment history might help you qualify for a zero percent balance transfer offer.

Zero percent credit cards can allow you to consolidate more than once balance and be free of interest payments for a period of time. But there are several things to keep in mind when shopping for zero percent credit cards.

• Balance transfer offers usually have a time limit. The zero percent interest period could last anywhere from six months to a year or even longer. Read through the card's terms to make sure you understand exactly when the zero percent period ends. Knowing how long the introductory period lasts can help you plan for paying off the debt, or at least paying down as much of it as possible.
• Once the introductory period ends, the interest rate rises to the regular rate. The terms of the card should explain exactly how finance rates are calculated.
• Missing a payment will trigger the default rate. Default rates can soar to 25 percent or higher, depending upon the card. Always pay attention to the due date so your payment gets to its destination on time.
• How much is the balance transfer fee? Even if you have a zero percent balance transfer offer, you'll probably have to pay a fee to take advantage of the deal. While some credit cards may offer no balance transfer fee, it's not easy to find this type of deal. Depending upon the card balance transfer fees may be as much as 5 percent of the balance. So if you transfer a balance of $5,000, a 5 percent transfer fee would run you $250.

Pay attention to credit limits

You may think you've hit the jackpot if you receive a credit card offer offering what seems to be a sky-high limit. But don't celebrate until you've verified that you actually qualify for the credit limit advertised in the offer. Any credit line you receive is going to depend on you credit score, income, and payment history. Credit card companies often review your credit score again before you can get approved.

In fact, don't be surprised if you receive balance transfer offers but are denied when you apply for a credit line. Even if you are approved for credit you may find that you don't qualify for a no interest card.

Many credit card companies are doing away with zero percent offers. They've become more cautious about extending credit while the economy is still shaky. That means you may have to really scour the Internet for the best credit card deals.

While you might be able to qualify for zero percent interest right away, you may find that you need a higher income or smaller debt load to get approved for the best credit card deals, so check back as your financial situation changes.

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