A 0% balance transfer can be useful financial product to help you control existing credit card debt and get all spending habits under control.
However you need to take the time to make meaningful comparisons of 0 balance transfer credit cards on offer because not all offer the same features and you may be best suited to a particular 0% balance transfer credit card offer. Features you can expect from a zero balance transfer credit card include:
- No interest charges on your transferred balance.
- A limited offer period.
- A higher revert rate at the end of the offer, usually the cash advance rate.
- You have the chance to take advantage of the opportunity of not paying any interest to make more than the monthly minimum payments and repay your balance sooner.
0% Balance Transfer Credit Card Comparison:
How Do Zero Balance Transfer Credit Cards Work?
A balance transfer credit card is one which repays the balance of an existing credit card and gives you a fighting chance at repaying your original purchasers without having to struggle with high interest charges. A zero balance transfer credit card won’t charge you in interest at all during the offer period, and work by:
- Allowing you to pay off just your debt. While this may be what you’re aiming for when you make payments to your standard credit card you are usually also paying a portion of interest. However with a 0% balance transfer credit card you are able to make payments directly to the purchases you have made without any interest charges getting in the way. This means all of your monthly payment goes towards paying down your principle balance and you pay that balance off sooner.
- Paying off one credit card with another. Your new balance transfer credit card will send the exact payout amount to your standard credit card to clear that balance. Your existing credit card will then have a zero balance, as that balance has been taken over by your new 0% interest credit card. A balance transfer credit card is just like any other credit card, it simply offers a special low rate for new customers with a BYO balance. Your old standard credit card is still valid and available, so it is important not to be tempted to spend on that card which has now been repaid in full because really you haven’t paid off all of that bad debt yet, you just have a better chance of repaying it now that it is on an interest-free payment plan.
- Offering a 0% interest rate for a limited time only. While a 0% balance transfer offer will typically only run for 6 to 9 months because the credit card provider wants to get you back to paying high standard rate of interest as soon as possible, why not think of it as motivation to pay your balance off sooner? If you know you only have six months where your balance will be free of interest, then why not use that six-month period to readjust your budget and really focus your payments to become debt free.
- Allowing you to break the cycle of compounding interest. Compound interest is good news for a savings account because it means you earn interest on interest and your balance grows more quickly. However, where the interest charges on your credit card earn interest upon interest each month your credit card balance can quickly grow out of control. With a 0% balance transfer credit card you avoid interest altogether and therefore also avoid compounding interest as well.
- Still require a minimum monthly payment. Most credit card providers calculate their monthly repayments as 3% of the balance and the daily calculation of the per annum interest-rate. However where there is no interest on a 0% balance transfer credit card you repay just a portion of your balance, and it is important to remember that balance transfer credit card still requires a monthly repayment, because in some cases if you miss your monthly repayment you can jeopardise your 0% interest offer.
- Starting your 0% offer as soon as your card is activated. Regardless of when you transfer your balance to your new balance transfer credit card, some providers will commence the 0% offer period from the time you application is approved and your card is activated. So it is important to find a 0% balance transfer credit card which allows you to automatically transfer your balance in your application form, or make sure you make the transfer yourself as soon as possible.
How To Choose The Best 0% Balance Transfer Credit Card For You
While there are some common features to 0% balance transfer credit cards, there are also a lot of 0% balance transfer offer is available so you need to make sure you find the one which best suits your needs and which most easily allows you to repay your balance. As you compare the offers on 0% balance transfer credit cards, remember:
- The competition is fierce. The 0% balance transfer credit card which first catches your eye will not necessarily be the one which is best for you. The credit card providers work hard to catch your attention and convince you that their deal is the best you, so make sure that all of the features and all of the fine print really to suit you.
- Decide when you will be able to repay your balance. Since a 0% balance transfer credit card offer is for a limited time only you may not be able to repay your full balance within that offer period. Therefore you may be planning to make another transfer at the end of your first 0% balance transfer offer, so you have more time to repay your balance. However, if this is your plan make sure to compare features such as the annual fee, which will usually be charged when your account is activated, and you don’t want to be paying hundreds of dollars in annual fees if you are going to be using several different cards within that same year.
- Every credit card application shows up on your credit report. Something else to keep in mind if you plan to transfer from a 0% balance transfer to another balance transfer credit card to continue to qualify for a low interest rate, is the fact that every credit card application successful or rejected, will be recorded in your credit history. This is important to keep in mind if you are planning on applying for a home or personal loan in the near future, and the health of your credit report should be at the forefront of your mind on a day to day basis because you never know when you will need a healthy credit history.
- You can only spend on a 0% balance transfer credit card with the same promotional offer on purchases. A 0% balance transfer and purchase credit card can allow you to earn a low or 0% interest rate on new purchases as you also earn a low or 0% interest rate on your transferred balance. If you are comparing this type of balance transfer offer make sure to choose a credit card which offers the same period and the same interest rate on both the balance transfer and the new purchases.
- Confirm your eligibility. Just as you don’t want endless balance transfer credit card applications to show up on your credit history, you also don’t want a failed credit card application to show up either. Therefore before you apply for a balance transfer credit card check the eligibility requirements of the card to gauge your success. Many credit card providers will clearly list the minimum income requirements on their website, or you can take a couple of minutes to call a provider, explain your situation and ask about the expected success of your application based on those details. This also gives you a chance to find out more about the service and facilities of the credit card provider, in case you need to call again as a customer with a problem or enquiry.
How To Make The Most Of Your 0% Balance Transfer Credit Card
Where most financial products will need to be closely managed to ensure you get the maximum returns, a balance transfer credit card will benefit most from being left at home. The most important thing you can do with your balance transfer credit card is to not make new purchases. This is so important that we are putting it right up front, because when you make a new purchase balance transfer credit card it will start being charged interest while you are still working to repay your transferred balance. This means all the good work you have done in choosing to make a balance transfer and comparing the best balance transfer offer for you, can be undone when you are charged interest on your new purchases.
You can also get the most out of your 0% balance transfer credit card by:
- If you don’t have a credit card debt to transfer use your card is a short-term loan. Typically a 0% balance transfer offer will run for at least six months, but it is possible to find special offers for up to 12 months. However just because you don’t have an existing credit card balance transfer, it doesn’t mean you can’t take advantage of a 0% interest rate. In some cases you can apply for a 0% balance transfer credit card and use the amount the credit card provider would transfer to clear an existing credit card debt, to deposit into a savings account. The funds in a savings account will earn high interest, while your balance transfer credit card earns zero interest. Then as the end of the 0% balance transfer offer approaches, you can use the balance in your savings account to repay your credit card, any interest earned over that period is yours to keep.
- Apply online to save time and money on exclusive offers. An online application for a 0% balance transfer credit card can be completed in as little as 10 minutes. An online application is as simple as entering your personal details, your identification details, income information, and details of any other outstanding credit card debts or personal loans. You will probably also need to provide contact details for your employer, or your accountant if you are self-employed however in taking just a few minutes to enter all of these details, means that your identity can be verified online and you can find out whether your application is successful within just 60 seconds. Credit card providers will also have exclusive 0% balance transfer offers which can only be applied for in online application, so save time by applying in your lunch break, and save money by enjoying exclusive online deals.
- If you can’t make your balance transfer in your application, make it as soon as possible. If the credit card provider allows you to enter your credit card details and the amount you are transferring in your application, you don’t need to worry about remembering to make the transfer. However in the excitement of a new credit card application you can forget that this is really only a balance transfer card not another credit card to take shopping, and often a 0% balance transfer offer begins when your card is activated not when you make the transfer, so you could be missing out on interest free time.
- Pay more than the minimum monthly payment. On a standard credit card your monthly repayment will have been made up of a portion of interest plus a percentage of your balance. However now that you don’t need to pay interest on your 0% balance transfer card, your monthly repayments may be significantly less. Instead of settling in to lower monthly repayments, keep up with the same monthly payment amount and you can repay your balance sooner.
- Set up an automatic payment plan if you don’t trust yourself. No matter how hard it was to pay the higher monthly credit card bills on your standard high interest credit card, you have gotten used to parting with that much money each month. Therefore if you don’t think you have the discipline to make the same level of payments if you don’t have to do, set up an automatic payment plan from your wages each month to keep your balance transfer repayments on track.
- Only use your balance transfer credit card for balance transfers. If you’re the type of person who needs a balance transfer credit card then you probably also the type of person who will be tempted to spend on their balance transfer credit card. Therefore make sure you only ever use your balance transfer credit card to make a transfer from your standard credit card. No matter how tempting it is to make just that one little purchase, that little purchase can add up to big interest charges. Instead, once your 0% balance transfer credit card has been approved and the transfer has been made, put the card away, don’t carry it with you, and don’t think of it as a credit card — it is not a credit card it’s a balance transfer card.
- Remain aware of when you deal ends. Even if you have the best laid plans in your budget to pay your balance transfer within the offer period, we all know that things can happen to derail our financial plans — after all that is probably how you got into this situation of needing a balance transfer to start with. Therefore always remain aware of when your balance transfer offer expires, so you can regularly check your progress and determine whether or not you will be able to pay your balance down to zero before your 0% interest rate expires. If it doesn’t look like you’re going to make it start shopping around for a new balance transfer deal several months out from the end of your current offer.
A 0% balance transfer credit card offer can mean you see significant results from the very beginning. The initial release from high interest charges can be enough to start you thinking that managing credit card debt isn’t really that hard at all. However this can be a dangerous trap to fall into, especially when 0% balance transfer credit cards often have a very short offer period and a very high revert rate. Luckily you now know about all the common traps that balance transfer credit card users can fall into, so that you will be able to avoid them. Instead of being trapped, you will be the one doing the hunting as you compare the features and fees, the offers and interest rates, of all the best 0% balance transfer credit cards, so that you can narrow down the one which will truly help you control your credit card debt and stop it from controlling you.
Posted on Tuesday, April 27th, 2010 at 10:40 am
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