Credit cards are always pushing mail offers that brag about zero percent interest balance transfer credit cards. These rates are enticing, and can make a consumer sign up for a credit card that they didn’t necessarily need. Zero percent balance transfer credit cards aren’t the credit card to get to finance a shopping spree, a zero percent balance transfer credit card is for aiding in quick debt elimination. If an unsuspecting consumer is not careful, when the introductory rate wears off interest rates jump to almost 20% in some cases.
In order for a zero balance transfer credit card to be advantageous to the consumer, the consumer must first accept the responsibility and then research the facts. Start by figuring out how high the interest rate on the credit card will jump after the zero percent introductory rate offer fades. Most credit card issuers give good credit consumers access to their zero percent balance transfer credit cards, average and bad credit consumers are subject to 2.99 percent interest introductory credit card offers. Generally, promotional rates last in between six months and two years, depending on the credit card. The most common credit cards have a standard 12 months where the introductory interest rate is valid. After that time period expires, interest rates can jump to 10.99% or 20.99%, as it varies from credit card to credit card. The lower the interest rate after the introductory offer, the better, although, with a balance transfer credit card, commitment to on time bill payment is key.
Also, when browsing the balance transfer credit card market, check and see whether or not the card charges a balance transfer fee. This fee is a fee applied when the balances of the different credit card debts are combined. Balance transfer fees can range from three percent to five percent of the balance being transferred. This fee is due upfront. For example, a $20,000 debt balance would have a transfer fee of $1,000, if the balance transfer rate were five percent. If a credit card doesn’t charge a balance transfer fee, the card may charge an annual fee. Factor this into accounting to see if the card is worth it.
A balance transfer credit card is best for the consumer who is dedicated to paying off their debt in the quickest way possible. This consumer should already have financial discipline and be able to pay their bills off on time, as late payments can be detrimental to debt elimination on a balance transfer credit card. Some balance transfer credit cards will remove the promotional interest rate that was offered if a consumer is late on a payment. Also, if a consumer is late they will be subject to penalty fees.
While the offers are plenty, and offer attractive rates, balance transfer credit cards are not for every consumer. Calculate if it’s a fit for you by analyzing the current debt you hold and their credit card hosts. Tally up the interest rates on current credit cards and see if it’s less expensive to pay those balances off with the credit cards you already have. Calculate these numbers by using the same introductory offer time period on the balance transfer credit card, whether it is six months or two years. Add in any extra penalty fees that you can occur, and see which card works best for debt elimination.