This article talks about credit cards with no interest on balance transfers and whether or not the offers make more promises than they can keep.
On the surface, 0% balance transfer credit cards look very appealing, especially if you have a balance on another card. But there are a few things you need to know before you get a credit card with a balance transfer.
Some people seem to get into trouble with their credit cards overnight. Some desperate people with credit cards are always looking for a quick way to fix their credit problems, even though they seem to be broke and have a lot of debt. A balance transfer that costs nothing
might seem like the best thing to do. Many of us jump at such offers without giving them much thought. Even if you have good credit, 0% deals on balance transfers or purchases might be hard to pass up. But if you have a big card balance (or multiple balances), a 0% credit card balance transfer will seem especially good. And it's no surprise that there are a lot of these types of balance transfer offers on the market right now.
No matter how good or bad your credit is, you should be careful and look into every part of any credit card offer you are thinking about. Even though a balance transfer credit card seems like a good idea, you might want to think twice before you cut up your old credit card to make room for the new one. Companies often don't explain the small print and hide the unpleasant details that could cost you a lot of money down the road.
Let's start with a very common situation involving credit. Imagine you owe $10,000 on a credit card with an annual percentage rate (APR) of 10%. That means you'll pay $1000 in interest each year. On the other hand, let's say you get a credit card that lets you transfer balances for free for the first year. If you moved your card balance to an offer with 0% interest, your annual interest costs would go down by $1000. Isn't it exciting?
But did you check to see what the interest rate would be after the initial period with no interest? The rate could end up being much higher than on your current card, and you don't want to be stuck with a high APR. If you know what to expect, you can prepare for it. You'll have to make plans ahead of time, not just a day or two before the interest-free period ends. Some people might be surprised to learn that when an introductory APR offer ends, the interest rate can go back to an APR of 23 percent or higher. If you don't make a plan to pay off your balance and end up with a big balance when the introductory offer is over, you may have to pay an APR that is way too high because you didn't pay down your balance at all. So, above all, make sure you plan to pay off that balance before the introductory period ends, or you may regret it.
0% Balance Transfer Here Are Some Points
When thinking about balance transfers on credit cards, you can help yourself by asking:
- What will the interest rate be after the introductory balance transfer period with no interest?
over?
- Will it be about the same as my current APR, or will it be much higher? What is the difference in total?
What will the difference in APRs mean in the long run, especially if you plan to keep a balance on your card?
Do I want to make it a habit to switch from one 0% balance transfer card to the next?
If your current credit card has a better long-term ongoing APR than the new one, it makes more sense to stick with it, especially if you can pay off your card balance without having to pay large finance charges. Balance transfer cards have their own pros and cons, but if you want to use them to your advantage, you need to know what the long-term net benefits of the card are.
