Before we deal with the advantages of 0% balance transfer, we must first understand what balance transfer is and how it is done.
What is balance transfer?
Most of the credit card companies promote balance transfer to attract newer customers to expand their business. The total concept of balance transfer helps a consumer transfer his outstanding balance on one credit card to another account of a credit card company that is offering a lower interest rate.
Balance transfer is beneficial for both the customer as well as the bank. While the customer gets to avail low interest rates, loyalty points and periods of no interest, the bank too gets a new customer, and the bank is able to increase its profit from the new interest.
What is 0% balance transfer?
0% balance transfer is the introductory interest rate that many credit card companies promote to get new businesses. This is done so that the new customers are attracted to the offer and transfers their accounts to the company. While the customers do get to enjoy the 0% APR for a period of 12 – 15 months depending on the promotional period, there will be interest levied on the balance once the promotional period expires.
Advantages of 0% balance transfer
1. 0% balance transfer helps the customer to enjoy some period of interest free credit amount. This saves a lot of money for the customers.
2. A person who takes advantage of 0% balance transfer is able to get out of his loan liabilities at a much faster and shorter period.
3. The balances on credit cards accumulate interest over a period of time can reach alarming figures. 0% balance transfer helps in reducing the stress in paying off these balances.
4. Besides the reduction in the loan amount, the customer also gains some loyalty points on his credit card that he can use later on for cash back or other gifts.
5. Sometimes having credit card balances on more than one card can be disastrous on your financial health. Consolidating all the credit card amounts into a single 0% account will save the monthly minimum instalments that have to be paid for all the credit cards.
Steps that are to be taken for 0% balance transfer
1. The first step is to negotiate for the longest possible days of 0% balance transfer. There are a few credit card companies that give interest free loan period that can last for almost 16 months. There are still other companies that give interest free loan for only the first two to three months. Advantage of the 0% balance transfer can be reaped if a customer is successful in availing the interest free loan for the longest period.
2. Compare the fees charged by the bank for balance transfer. Make a deal with the credit company that charges the lowest fees for money transfer.
3. Lastly, we have to keep in mind that we cannot avail 0% balance transfer within the accounts of the same credit card providers. Hence, we need to look into the deals carefully and make a choice.