Are 0% Balance Transfer Offers Really Free?

by: Debbie Dragon

Paying off credit card debt with 0% interest is a dream come true –
which is exactly why a large number of credit card companies offer the
promotions. They know it will attract new customers who have debt with
other credit card companies to transfer that debt to their cards. But
where is the value to the company offer the credit card balance
transfer offer; if they let you repay that debt with 0% interest?

Whenever you see credit card promotions that sound like they're going
to be a good deal for you, it's best to look into them closely and
make sure you read all of the "fine print". A 0% balance transfer is
typically good for a specific length of time, six months or twelve
months are the most common terms. If you have several thousand dollars
of debt on a higher interest credit card and take advantage of a 0%
balance transfer offer for twelve months, the credit card company is
betting on you still having a balance once the promotional period
ends. When the six or twelve months of no interest repayments end, the
balance will start being repaid with interest.

A common mistake many people make when transferring balances under the
six or twelve month 0% promotional offers, is not checking what the
interest rate will be after the promotion ends. If you're moving a
balance that you are currently paying 9% interest to a card with an
interest rate of 19% after the promotional period ends - unless you
are able to pay it off completely during the 0% interest period, you
are not likely to benefit financially over the long term. You would
have to start looking for another 0% balance transfer offer, or pay
the higher interest until the balance is paid off.

The other often overlooked factor of balance transfer offers with 0%
interest is that most of them charge a transfer fee. The fee can range
from 1% to 5% of the amount transferred. This fee can add up,
depending on how much money you are transferring. There are some
instances when the amount you pay for the balance transfer fee will
result in more money paid than if you had just kept your balance on
the card it was on and paid interest. To ensure you're actually
getting a good deal, you'll want to play with the numbers and
determine how much you'll spend for the life of the balance if you
keep it on the card it's currently on, or if you move it to the new
card with the 0% balance transfer offer, and don't forget to factor in
a transfer fee if you have to pay one, and what the interest rate will
be at the end of the promotional offer.

Interest free balance transfer offers are also only good as long as
you make your payments on time. This is important to keep in mind if
you sometimes have difficulty keeping up with your payments, because
if you send one a few days late you can lose your 0% interest rate and
start paying a much higher interest rate.

In order to make balance transfer fees work for you financially, it's
actually better to find a low interest balance transfer offer that is
fixed for the length of the balance. If you can transfer a few
thousand dollars from a credit card with 9% interest or higher, to a
card with 1.99% or 3.99% fixed interest on the balance transfer for
the life of that balance, you will save hundreds of dollars in
interest and actually make out better than the 0% offers (provided you
know you can't pay off the entire balance before the 0% offer ends).