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The main incentive that a 0% balance transfer credit card offers is that your balance won’t accrue any interest for a specified period of time, allowing all of the payments you make during that time to be put entirely towards the elimination of your debt. This promotional introductory period can last anywhere between six months and two years, depending on the specifics of the offer.
However, you should realize that there is a fee for suspending interest. A balance transfer fee is a percentage of the overall amount to be transferred. While that is typically in the realm of 3%, some issuers charge as much as 5%. That is why it is important, before you go ahead and apply for a new card and set a balance transfer in motion, that you sit down a moment and do the math. If the fee you have to pay in order to shift the balance from one card to another is equal or greater than the amount you stand to save in interest charges, then it’s not worth doing.
Chances are that you are considering transferring a balance because a particularly attractive offer caught your eye. What you should realize though, is that banks often use balance transfer offers to lure consumers with good to excellent credit ratings away from their current card issuer. You may not necessarily be approved for the offer you had your eye on, or it may be availed to you on slightly different terms – a shorter 0% APR introductory period, for example. Or the bank may only approve a portion of the amount you requested to be transferred, due to tighter underwriting practices or the current state of your credit score.
Make sure you know what the APR will be once the introductory 0% period expires, and realize that if you are late with any of the payments you make during the promotional period your rate will likely jump automatically to the standard rate.
The best way to finish ahead with a 0% balance transfer offer is to figure out a way to repay the entire balance within the 0% APR period. If you anticipate still needing to charge things to your credit card while you are working to pay down the balance, look for a balance transfer that offers 0% not only on transferred balances but on new purchases as well. Bear in mind, though, that it is a possibility that the promotional interest period for new purchases may very well be shorter than that of transferred balances.
Finally, keep in mind that any time you apply for a new credit card your credit score suffers slightly. While the impact is minimal, if you have plans to apply for a bank loan or a mortgage in the near future you may want to hold off on attempting to acquire a new line of credit for the time being.