The allure of zero percent balance transfer credit cards has seen a lot of people chopping and changing their card to continue getting the best deal, but is it wise to use a zero percent balance transfer card? The answer to this question can be yes and no. Let me explain.
From the consumer’s point of view a zero percent balance transfer credit card may seem the answer to their prayers, well not literally but I’m sure you know what I mean! If you have any size of credit card balance and are paying a high interest rate on this amount you will know how hard it can be to get that amount down. Enter a balance transfer card that is offering an interest free period and it all makes good sense.
Balance transfer cards usually have a zero percent, or very low introductory interest rate, for a period of anywhere between three and fifteen months. What this does is gives you a few months relief from paying interest on the balance owing and if you can pay off the debt in this time you stand to save yourself quite a bit of money in interest payments.
If you have a large amount of debt that you are trying to reduce you could always apply for a couple of different balance transfer cards or keep the card until the interest free period is up and then switch to another provider and stay with them until the interest free period is over etc, etc. While in theory this sounds like a good way to save on interest, and you will be saving on interest payments, you need to be aware of the other charges that are likely to arise from using these cards.
The lender will usually charge around 3% to 5% of the balance amount for taking on your debt and there could also be ongoing fees that you need to factor into the equation. Another very important point to consider is that if for some reason you do have to keep the card after the promotional zero interest period is over, what is the interest rate likely to be? You may find that compared to other cards this interest rate is ridiculously high and so you have to carefully weigh up the pro’s and con’s before making a decision.
While a zero percent balance transfer credit card is a great way of reducing your debt by lowering your interest payments, you still must do your homework and be sure that you are not simply replacing an interest rate payment with a payment of another name, i.e. the amount it will cost to do the balance transfers. Done properly it may be your ticket to a credit card debt free life but just keep in mind the above points before making your final decision.