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0% Balance Transfer – is it too good to be true?

Balance transfer is an excellent option for those who want to reduce their credit card balance as soon as possible. You can use one credit card with lower APR instead of keeping multiple accounts. There are some very attractive balance transfer offers in the market now.

How it works

It’s easy: you transfer your debts from one account to another. Your new credit card issuer buys your debt from the old bank and you start receiving bills from the new one. It usually makes sense if APR on a new card is much lower than an old one. Actually it can be even 0% but for a limited time only – for a year or a half. If you a waiting for some money to come in and can pay all your debt in next 6 month, 0% balance transfer can save you much money.

How to evaluate 0 APR offers

0% balance transfer sounds very attractive, but to evaluate the real offer you should read the fine print carefully:

  • The longer introductory period lasts, the better – that means you have more time to reduce the body of your debt instead of paying interest. 0% APR usually lasts from 6 to 12 months.
  • The lower APR the better – check the interest rate after the introductory period. If it’s higher than your current one, the offer is not so good.
  • Annual fee and transfer fee can eliminate benefits of rates reduction. Crunch the numbers to find out your real benefits of the deal.

Reasons for balance transfer

The main reason for it is to drop down your credit card balance by reducing interest rates you have to pay. Another reason for credit card debt consolidation is that it’s much easier to manage one account instead of a few ones. You get one statement and pay one bill – so all your payments are submitted on time and your credit score is growing. Even if you are late with your payment you still saving money, because you pay one late payment fee instead of 2 or 3. Though you should try to avoid late payments and make more than just a minimum payment each month to become debt free faster.

 

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