Balance Transfer Credit Cards: Are They Right for You?

If you are carrying a balance on one or more credit cards you already have, you may want to think seriously about applying for a new 0% balance transfer credit card offer.

Now you may be wondering how an issuer can possibly offer 0% balance transfers on credit cards, but it’s true. Many leading banks offer interest free balance transfers. That’s right, you can transfer balances from your current credit cards onto the new card that you apply for and pay 0% interest on the balance for up to 12 months. What’s more, some programs have absolutely NO fees to make the transfer, though you must qualify by having excellent credit. Other programs charge a 3% fee of the amount you transfer, but many banks commonly cap the fee at $75. That means that transferring more than $2500 will not cost you any additional fees.

Determining If a Balance Transfer Credit Card is Right for You

There may be a few cases when some consumers do not benefit by transferring to a zero interest rate card. For example, if you carry only a small balance from month to month and you intend to pay it off soon, it may be better to choose another credit card that offers a different benefit such as frequent flyer miles or bonus points good for merchandise, since the 0% interest savings are minimal for you.

But in most cases, taking advantage of a 0% credit card offer is a great deal. After all, why continue paying interest on your credit card balance with one bank when another bank is offering you 0% interest? There is no logical reason not to save yourself money.

The Benefits of a 0% Balance Transfer Credit Card

1. Paying 0% interest for 12 months can provide relief if you need to devote your cash to other expenses. With 0% interest, your monthly minimum payment is actually less than a credit card that charges interest, because more of your payment goes to paying off your principal each month rather than to paying the interest fees.

2. Alternatively, a 0% interest credit card allows you to pay down your debt more quickly because you might be able to increase your monthly payment since you no longer are paying interest for one year. For example, if you transfer $5000 to a 0% card, and your previous card had a 12% APR interest rate and a 3% minimum balance due payment, you would have spent $538 in interest fees over the year. But with the 0% card, you can choose to pay that extra $40 - $50 per month towards your principal, and thereby reduce a sizeable chunk of your debt.

3. Similarly, a 0% interest credit card might even allow you to pay off your balance with less each month if you chose to do this. For example, if you transferred $5000 and intended to pay if off over 1 year, you would need to pay $444 / month with a 12% interest card, but only $416/ month with a 0% interest card, a savings of $28 per month.

An Important Caveat

Please note that with any of the 0% balance transfer credit card offers, you must commit to making your payment on time each month. If you miss a payment or are late, you risk losing the 0% rate and you may find yourself paying a higher penalty interest rate on balances owed, so pay attention to your credit card statements and make your payments on time.

All in all, the savvy consumer should take advantage of the best 0% balance transfer credit card offer he or she can find. The best course of action is to look on the Internet for 0% card offers and assess the best choice for yourself, such as the Citibank Platinum Select Visa (with no transfer fees), or the Chase Platinum Visa, or HSBC Platinum MasterCard to name a few. It is recommended that you apply for the best card your credit history can qualify for and transfer as many balances as you can to take maximum advantage of these offers.

Copyright 2005 Ed Vegliante. Free online reprints of this article are allowed provided the resource box remains intact with a live link back to http://www.credit-card-surplus.com.