How 0% Balance Transfer Credit Cards Can Save You Money

At least two or three times a week, you are barraged by a slew of new credit card offers, with each one offering something better than their competitors. Better rewards. Better APR. Better cash back. But in almost all cases, they all like to offer an “Introductory 0% APR Balance Transfer.” If you have a substantial credit card balance, you could take advantage of their generosity and save bundles in finance charges.

What’s the catch?

Many credit card company offers include “catches” that practically zero out any savings you might have made with a “zero” percent balance transfer. In order to make a significant savings on a balance transfer, you must read the fine print and make wise decisions on which card is best for you.

Introductory only

Usually the 0% APR is an “introductory” rate that usually lasts for only about six months. But if you have a balance on your current credit cards which is charged a finance fee each month, you can use the introductory six months to pay down that debt.

Be sure to read the fine print of the credit card offer. Although 0% interest sounds good even for an introductory offer, the APR will switch to a permanent interest rate. Some tricky credit card companies offer you the 0% then hike the rate to about 20% or more. Your job is to find the credit card offer that will ultimately offer the lowest permanent APR after the introductory moratorium on interest.

What is the transfer fee?

Most balance transfers will include a transfer fee of up to 3% of the balance, with a cap at $50 to $75. If you choose to apply for a new card with a transfer fee, figure it into your calculations to see if you will really save any money.

Beware of high annual fees

Also, look for credit cards that offer no annual fee. Credit card companies also will try to entice you to join their credit card club with a 0% intro interest, but then charge you exorbitant annual fees every year. By paying an additional $50 to $70 bucks for an annual fee, have you really saved that much on the interest with a balance transfer?

APR for new purchases

A 0% introductory APR may be good only for a balance transfer from your other credit cards. However, any new purchases you make might be charged at a regular interest rate. Try to find a credit card offer that also offers a 0% introductory interest rate on new purchases as well.

Minimum purchase necessary

Many credit card companies will instill a minimum purchase requirement each month to keep the 0%. That means in order to keep your transferred balance rate at 0%, you must make additional credit card charges at a regular interest rate.

Avoid this pitfall. A good strategy is to accept a credit card offer with a 0% interest on balance transfers with no additional purchases necessary. You could then simply use the six months to pay down or completely pay off the debt.

With so many credit card offers bombarding you, it can be difficult to tell which one has the best offer. With a little digging into the fine print, you can be sure to save money on a 0% balance transfer on a new credit card.

Write to Grace Carter at grace@creditdonkey.com