Credit cards with 0 interest on balance transfers are a smart way to reduce interest payments and catch up on accumulated debt. The borrower will have between six months and a year of zero percent interest before the creditor switches to the rate advertised in the contract. This is a valuable time for paying down balances or making important purchases.
Why Transfer
Borrowers apply for zero rate cards to buy time on high balances, avoid paying a double-digit rate, or to pay for an item in installments without additional charges. Borrowers also take advantage of these offers to consolidate debts. When a balance is high, interest represents a significant portion of the monthly payment. Moving all or part of this account to a zero rate card makes it easier to pay off.
Consolidating debt in this manner is helpful but temporary. The accounts must be paid down during the introductory offer period or high interest will begin to accumulate again. Credit card users often apply for 0 percent offers when creditors will not negotiate their existing rate, as well.
Many companies will raise interest charges when a payment is late or missed, causing exorbitant charges to ensue. If the new charge can not be negotiated, a borrower will move all or part of their account to a company with a lower interest rate. This is usually an introductory six month offer followed by an annual percentage rate (APR) similar to the original account before they were penalized. The borrower benefits from the initial offer and the elimination of the penalty.
0 percent offers are used to avoid charges on purchases completely, but this practice has drawbacks. Greater purchasing power is granted to those with established and loyal credit activity. Low or zero percent promotions have low balances to start, and only increase after establishing a good history. A person moving their balance from low offer to low offer will pay little or no interest, but they will not establish significant purchasing power.
Study the Contract
A borrower can be lured into signing up for a credit offer with low or no interest and have unexpected charges if they do not read the contract carefully. Before signing up for the card, understand what the monthly and annual fees will be, if any. Read the fine print for the post-introductory APR and calculate the amount of the charge if the balance is full when the new APR starts. When charges are in excess of the amount the borrower is comfortable paying, the offer should be ignored.
Sample Offers
All major banking institutions and prominent credit card companies have a version of the zero interest APR offer. One option for a Mastercard gives the borrower 21 months at 0 percent on a balance transfer and has no annual fee. The guidelines give the cardholder 0% for a year on any new purchases. The creditor offers discounts on entertainment and travel as well.
Another choice gives the individual six months of 0% on new charges and eighteen months for portions transferred. This offer includes rewards of 5 percent cash back when using their card to shop. There is even a large bank rewarding new customers with a $50 dollar signing bonus. This creditor gives five percent cash back every quarter on commonly purchased items like gas and home improvement necessities.
These cards have no annual fees, but will convert to rates from 13 to 23 percent after the temporary promotion expires. Initial balance limits will be higher than average, as well, but companies who provide a lower APR and low or no fees have stricter requirements. People with negative marks on their credit histories may be denied. Special promotions are also available for applicants with bankruptcies, delinquencies and other problems on their credit report. Negative trade lines should be well in the past before applying, and expect to pay annual fees and a higher APR for the privilege of opening an account.
How to Transfer
Get started by filling out an application online or in person. Answers are received quickly and an approved borrower will receive their card within seven to ten days. The application will ask about balances being transferred and guide the applicant to do it correctly. Take the time to read through the contract and understand all applicable interest charges and fees before applying.
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