Is a Zero Percent Balance Transfer Really a Good Idea?
Things You Want to Check Before Applying for a Zero Percent Balance Transfer
If you have racked up quite a bit of credit card debt, those zero percent balance transfer offers may be quite enticing. After all, why should you keep paying an interest rate of nine or ten percent if you could transfer your credit card balance and pay absolutely no interest with a zero percent balance transfer? While the zero percent balance transfer may seem like the ideal situation at first glance, when you dig a bit deeper you can see where these offers aren’t always everything they’re cracked up to be.
Zero Percent Balance Transfer vs. Low Interest Credit Card
There is a big difference between a credit card offering an introductory balance transfer rate of zero percent and a credit card offering a fixed low APR interest rate. Let’s say you were looking at two credit card offers. One was offering a zero percent introductory rate and the other was offering an interest rate of 9.5 percent. Which one would you choose?
If you said you’d choose the credit card with the zero percent interest rate, you may be making a huge mistake. What if that zero percent interest rate only lasts for six months and at the end of those six months, you have to pay an interest rate of nineteen to twenty percent? It’s not such a good deal after all, is it?
While the initial 9.5 percent interest rate is obviously more than 0 percent, if you take the 0 percent credit card after six months you’re paying more than you would have if you had taken the card with the 9.5 percent interest rate.
Other Things to Watch For
When you’re looking to transfer your current credit card balance to a credit card with a lower interest rate, you don’t want to look at the interest rate alone. Many credit card companies charge a balance transfer fee. If you are transferring three thousand dollars and the credit card charges a three-percent balance transfer fee, it’s going to cost you ninety dollars just to transfer your balance. Not such a good deal.
If you’re paying a high interest rate and you need to transfer your credit card balance to a credit card with a lower interest rate, you may want to consider Pulaski Bank Visa Gold card. This credit card doesn’t have a zero-percent introductory rate, but it does offer an APR of 9.5 percent and the card does not charge any balance transfer fees.
The Pulaski Bank Visa Gold card can be found at this low APR interest credit cards website. It is the second card from the bottom of the page.
Comments
Also, be aware that many of these will allocate all payments to balances with lower interest rates. That means anything you charge will be paid after the balance transfer has been paid off & you will pay full interest until then.
Posted by: Kevin Synnott | September 13, 2006 10:55 AM
One way to make use of the 0% interest for a limited time offer is to find one with no balance transfer fee and a 0% interest for at least 18 months. Then make payments large enough to pay it off in those 18 months. We have done this with several cards where the balances were low enough to allow us to pay it off in the 18 months. Then the payments to other low interest cards can be increased in the amount we were paying on the 18 month one. You can pay a lot more off if you aren't paying any interest but do watch out for the balance transfer fees!
Posted by: Mary | September 13, 2006 12:01 PM
you don't cover a lot of cards that offer 0%,with fees of 3% or $50 or $75 max offers. Or low interest for life of loan ie: 1.99% with no fee or 3% with max of $50 or $75.....
(i am not too computer literate so i don't know what URL is --- sorry)
Posted by: tom plazo | September 13, 2006 12:16 PM
MBNA currently offers 0% for ≈six months but charges 3% off the top (simple interest).
Posted by: jimhadden | September 15, 2006 4:57 AM