Learn about how a 0% interest balance transfer can help you tackle your credit card debt


A heavy debt burden can be the most depressing, disheartening thing that blights your whole life. If you find yourself paying debt off, yet seeming to make no progress at all, it feels like you’ll never get out of the swamp.


You may not be aware of it, but the banks have come up with a superb solution to this problem – credit cards with 0% interest on balance transfers.


How It Works


How they work is simple – you take all your credit card debt, which can be attracting anywhere from 13% to 20%+ interest, and transfer the lot to another credit card which is offering 0% interest for a limited period, usually 6 months.


Nearly all cards have this initial arrangement, so it makes sense to look beyond the introductory period and see what the standard rate will be after the six months. The most important thing to remember about using your credit card with 0% interest on balance transfers is not to use it for ordinary purchases while you’re paying off the transferred debt.


That’s because your repayments are first applied to those debts with the lowest interest rate, leaving the high interest rate debt piling up in the background.


You could end up no better, or even worse, off than when you transferred your balance.


A Practical Example


Just to see how it works: imagine you’re paying off a credit card debt of $1000 at say, 20% interest. That represents $100 over six months.


If you have a credit card with 0% interest on balance transfers, you’ll save you that $100.


When choosing your credit card with 0% interest on balance transfers, as with all kinds of credit cards, you have to research all aspects, like the standard rate of interest, how long any introductory offers last, what rewards programmes are available, what are the annual fees and what are the differing rates for cash transactions.


A Debt-free Boon


For the fortunate among us who are debt-free, a credit card with a 0% interest rate on a balance transfer is a useful way of getting an interest-free loan for six months.


As long as you stay abreast of when the interest-free period runs out and you repay the loan as soon as possible, you can get a handy little loan at a very attractive rate.


The bottom line with these credit cards is, however, that you got into trouble because of your spending habits. Learn to control them before you get into the financial cactus again.


Credit cards balance transfer is usually a very attractive offer. This is especially true for those who find themselves deep in debt with very high interest rates to pay. However, in availing of this offer, you should know what is involved in the card’s policy, terms and agreement. Be aware of the introductory period and the dollar value of what you can save in order for you to differentiate between an intelligent choice and a bad one.

When you avail of credit cards balance transfer, what you are actually doing is moving your balance from one credit card to another card that offers better interest rates. Remember that creditors make this offer for one basic reason-they want your account. They do this not only to get more clients but more particularly to make more profit.

How do they make profit with low interest rates or even 0 interest rates for that matter? Easy, they wait for their clients to make a mistake. In their business, it is easy to bank on their customer’s negligence.

1. If a customer is late in paying, the initial interest rate of the credit cards balance transfer will be void. One late payment will jack up the interest rate to a much higher amount not to mention the outrageous service charges for late payments

2. There usually is an introductory period for 0 to low interest rates offers. After 6 to 12 months, the interest rate will be considerably higher. If the client holds a significant amount of balance after the introductory period, this client will be obliged to pay that interest no matter how high it is

Of course, aside from client’s negligence and credit card mismanagement, they also make money through transfer fees, annual fees, and other service charges applied to credit cards balance transfer.

When it comes to terms, there are two kinds of offers in credit cards balance transfer. One of those is an offer of a low interest rate and another would be an offer of an interest-free period (0 interest rate). Both offers each have their expiration dates. After this period, the interest rate will revert to the credit card usual rate. Most of the time, you’ll need to pay a transfer fee. Usually, it is a percentage of the total amount of the balance you will be transferring to that account.

Remember that credit card companies make attractive offers to lure clients in for credit cards balance transfer. They only have one agenda in mind and that is to make a profit. So before you make this switch, do your homework and carefully check if this transfer will save you money in the end. If the interest you used to pay on the old credit card comes out to be less than what you would be paying for the transaction fee, inevitable late payment charges, and the like, then you might as well stick to the old one.

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