The Lowdown on 0% Balance Transfer Offers
Paying off credit card debt with 0% interest is the perfect scenario, which is why many credit card companies offer such promotions. They know it will attract new customers who have debt with other credit card companies to transfer that debt to their cards. But where is the value to the company offer the credit card balance transfer offer; if they let you repay that debt with 0% interest?
Whenever you see credit card promotions that sound like they’re going to be a good deal for you, it’s best to look into them closely and make sure you read all of the small print. A 0% balance transfer is usually good for a specific length of time – normally six or twelve months. If you have several thousand pounds of debt on a higher interest credit card and take advantage of a 0% balance transfer offer for twelve months, the credit card company is betting on you still having a balance once the promotional period ends. When the six or twelve months of no interest repayments end, the balance will start being repaid with interest.
Remember to check what the interest rate will be after the promotion ends. If you’re moving a balance that you are currently paying 9% interest to a card with an interest rate of 19% after the promotional period ends - unless you are able to pay it off completely during the 0% interest period, you are not likely to benefit financially over the long term. You would have to start looking for another 0% balance transfer offer, or pay the higher interest until the balance is paid off.
Another thing to bear in mind is that most credit card companies charge a transfer fee. This can range from 1% to 5% of the amount transferred. There are some cases where the amount you pay for the balance transfer fee will result in more money paid than if you had just kept your balance on the card it was on and paid interest. To ensure you’re actually getting a good deal, you’ll need to play with the numbers and decide how much you’ll spend for the life of the balance if you keep it on the card it’s currently on.
Interest free balance transfer offers are also only good as long as you make your payments on time. This is something to bear in mind if you have difficulty keeping up with your payments, because if you are late you can lose your 0% interest rate and start paying a much higher interest rate.
In order to make balance transfer fees work for you financially, it’s better to find a low interest balance transfer offer that is fixed for the length of the balance. If you can transfer a few thousand pounds from a credit card with 9% interest or higher, to a card with 1.99% or 3.99% fixed interest on the balance transfer for the life of that balance, you will save hundreds of pounds in interest and actually make out better than the 0% offers (provided you know you can’t pay off the entire balance before the 0% offer ends).