If you're looking to reduce credit card debt and free up cash flow for the upcoming holiday season, a no fee 0% APR balance transfer is an excellent way to save substantial amounts in monthly interest payments. If you qualify you could save hundreds or thousands of dollars in interest and still have plenty to get the kids the latest Kinect games for their XBox this Christmas.
In this article we'll discuss what 0% APR balance transfer cards are, how you can benefit from many 0% APR balance transfer offers, what to watch out for when you choose a 0% APR balance transfer credit card and a few tips and tricks on finding the best way to complete a 0% APR balance transfer. By the end of this article you will have learned everything you need to find the best 0% APR balance transfer card for you.
What is a 0% APR Balance Transfer Card?
You have probably seen many of these types of offers in your mailbox. Credit card companies try to earn business by offering low, or in many cases 0%, introductory interest rates when new customers transfer a balance. The credit card company hopes to gain a customer and after a few months, when the interest rate returns to a higher rate, they also hope to gain the interest payments. For the customer, a 0% APR balance transfer card can mean a few months of zero interest payments.
Benefits of 0% Balance Transfers
A 0% APR balance transfer can save borrowers hundreds of dollars of interest over a 6 month promotional period. As an example, if you have a $10,000 balance and are paying 24%, a 0% balance transfer will save you roughly $1200 in interest over 6 months. The savings opportunities these types of offers provide cannot be denied.
Another benefit these cards provide is the opportunity to make some real progress paying off your card. Use the money you are saving in interest to pay down the balance on your card. If your old payment was $250 and your new payment is $175, use that $75 difference to pay down your principle. You'll be surprised at how much progress you can make toward reducing your debt in just a few months.
Many Visa 0% APR balance transfer offers are for larger credit lines which would allow you to consolidate debt. By combining several credit card balances onto one account, you dramatically lower your total minimum monthly payments. You can either use the savings to help ease your cash flow each month, or as suggested above, use the difference to pay down the principle amount.
Pitfalls of 0% APR Balance Transfer Cards
While most 0% card deals offer a tremendous interest savings, there are a few things a savvy consumer needs to be aware of before submitting an application. The first are the fees that are involved and the second is the time limit on the 0% offer.
Most 0% APR balance transfer cards have either an annual fee associated with the card, or a balance transfer fee. Annual fees typically range between $30 - $100 and are charged to the card when the account is open and then again every year on the anniversary date.
Balance transfer fees are a % of the amount transferred and are an average of 3%. On a $20,000 balance transfer that means you will pay a $600 fee up front to complete the transaction.
The biggest drawback of a 0% APR balance transfer may end up being the adjusted interest rate. 0% balance transfer programs have a time limit. Usually the borrower has 3 to 6 months at 0% interest and then the interest rate returns to the standard % rate. Read the fine print carefully. Some credit card companies classify balance transfers as cash advances and will put your balance transfer at a higher interest rate than regular purchases. This can be hard to see with most offers, because they are usually worded in a way that sounds like the regular annual percentage rate is low. Be wary of offers like "0% APR Balance Transfer for 6 months with 9% APR on purchases". This sounds like your interest rate on your balance transfer will be 9% after the 6 months, but really only new purchases will be 9% and your transfer APR could wind up at 24%.
Getting the Most from Balance Transfers with 0% APR
There are a few tips and tricks you can take advantage of to get the most from a 0% APR balance transfer.
1. Know the fees up front. Determine if the 0% interest rate will save you enough money over the promotional period to cover the balance transfer fee.
2. Negotiate the balance transfer and/or annual fee. With balance transfer offers it can make sense to call the card company instead of applying online. By talking to a credit card company representative you may be able to lower the balance transfer fee, annual fee or both. You can't get what you don't ask for.
3. Set a reminder warning you 30 days in advance that the promotional rate is about to end. You can either do another 0% APR balance transfer to another card, or you can pay off the card before you begin to accrue interest.
4. Use the 0% APR balance transfer to pay off your highest rate credit cards. Make sure that you transfer the balances that you are paying the highest interest rates on for maximum savings.
0% APR balance transfer programs offer a lot of benefits. From substantial savings to debt consolidation, most people can improve their cash flow by taking advantage of these offers. While consumers can save a great deal of interest by taking advantage of 0% APR balance transfer offers, these programs are not without their downsides. Make sure you investigate the balance transfer and annual fees before submitting your application â often these fees can be negotiated down or even eliminated. Also, be sure that you understand what the interest rate will be when the promotional period expires and set a reminder well before that date so you can reevaluate your situation. With the information in this article you should be able to find the best 0% APR balance transfer offer available.