Discover joins balance transfer ’21 club’

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Discover joins balance transfer '21 club'

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Discover Bank has hopped on the extra-long balance transfer bandwagon with a card offering zero percent APR on balance transfers for up to 21 months. The “Discover it” card is the newest of the balance transfer bunch to offer an extended interest-free period that makes it competitive with — and in some cases better than — a personal loan.

With credit card debt close to a trillion dollars in the U.S., a zero percent APR for 21 months can be a boon for those looking to pay down their credit card debt without borrowing more elsewhere.

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Other members of the ’21 club’

The Citi Diamond Preferred and Citi Simplicity cards are the only others offering 21 months of  zero percent interest on balance transfers, the longest offer of its kind currently available. All three cards also come with a 3 percent balance transfer fee. But the Discover it card is the only one in the group offering cash-back rewards.

Any approved new cardholder who transfers debt to the Discover it card under its new balance transfer offer won’t have to pay interest for 21 months. The long interest-free period can mean significant savings for those who’ve racked up a lot of debt.

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Favorable math

Someone who owes $5,000 and transfers that balance to a card with zero interest for 21 months would pay a one-time balance transfer fee of 3 percent: $150, in this example. A cardholder who pays a $238 a month would be able to pay off the balance without accruing any additional interest by the time the introductory offer ends.

By comparison, someone with good credit who owes $5,000 on a card with an APR of 14.99 percent and makes payments of $238 a month would need 25 months to pay off the debt. Their payments would include $836 in interest charged over that time, on top of the initial debt, and that’s without factoring in any additional charges on the card.

Advantages over a personal loan

A lengthy interest-free period on a credit card may, in some cases, be less expensive than taking out a loan to pay off a big debt.

The current interest rate on a personal loan of $5,000 for someone with good credit is, on average, 14.56 percent. If you made monthly payments of $238, it would take 25 months to pay back the loan, and you would accrue $807 in interest over that time.

If you compare that to taking four months less to pay back the $5,000 balance without adding on extra interest charges, it probably makes sense to go with a 21-month, zero percent APR balance transfer credit card.

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