If you have an interest-bearing debt, you can consider transferring the balance to a 0% interest rate credit card. It is an effective way to eliminate high interest debt and become debt free sooner. Why spend hundreds of dollars on interest charges when you can use your money more efficiently? Moreover, many balance transfer credit cards come with high credit limits, moderate fees, reward points and cash back for qualified applicants, so they can become a real treasure for your wallet. Our tips will help you to avoid pitfalls and make a beneficial deal.

1. Pay attention to a balance transfer fee. It is one-time fee charged by some credit card issuers for moving your balance from one plastic to another. Its amount can be fixed, for example 20 dollars, or vary from 1% to 5%. Some credit companies don't charge a balance transfer fee. So read the fine print to find out what fees you need to pay.

2. Zero interest rate doesn't last forever. When the introductory period expires, you will be shifted to a regular APR. That's why you need to pay off your debt in full within the intro period or find another balance transfer credit card when the intro period is over. If you are going to leave the remaining balance on the card afterwards, check what APR you will need to pay.

3. Zero percent interest rate on balance transfers doesn't mean 0% APR on purchases. Any additional charges will accumulate interest. Thus, if you are going to take the credit card and go on a shopping spree or vacation, you need to find plastics which provide low rate on purchases or 0% rate on both balance transfers and purchases.

4. Generally, 0% balance transfer cards use negative payment hierarchy. It means that the least expensive debt is repaid first, and more expensive debts (cash advances or purchases) are covered later, so they accumulate interest. For example, if you transfer $2000 to a credit card, and then buy a stereo for $300 with the same plastic, you'll be paying interest on the purchase until you've paid off the previous debt in full. That's why you should not make large purchases on your 0% balance transfer card until you have paid your debt in full.

5. Shop around for the best 0% balance transfer credit card. Not all plastics are created equal. You can find offers that provide different balance transfer fees or introductory periods of time: from 3 to 15 months.

6. Look for the cards that come with additional perks and benefits. Having a debt doesn't mean that your plastic should not be beneficial. Some credit cards with 0% APR provide attractive rewards programs. Depending on whether you want to get cash back, significant gas discounts or free air line tickets, you can choose the plastic that suits your needs. However, the balance transfers that you make don't qualify for credit card rewards.

7. Keep in mind that you still have a debt even if your plastic provides zero interest. You need to control your expenses and make payments on time. Credit cards with 0% APR can be a very tempting privilege, so use them smartly.

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Comments

Joan A. Jones, 12:11 AM, May 05, 2008
I never knew about negative payment hierarchy, thank you for information!

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