Getting the offer in the mail for a zero percent interest credit card with a no-fee balance transfer can be quite appealing. However, regardless of the upfront appeal of an offer that typically seems too good to be true, know that these sorts of offers are (all too often) too good to be true themselves. When it comes to robbing Peter to pay Paul in the wild world of balance transfers, there are a few things that every consumer needs to know.
Balance transfer fees
Balance transfers in the world of credit cards are quite common. In some cases, the card you are transferring the balance from can charge you a fee to do so. In addition, the credit card you are transferring your balance to can charge you an additional fee. Generally, balance transfer fees range from three to five percent of the total balance you are transferring, which can make your balance transfer a far more costly ordeal than you might realize upon inception. Make sure to read the fine print before committing to a high balance transfer fee for any credit card and for any reason.
Remember the introductory rate
Most zero percent credit card offers only offer that rate to you for a short time. After the introductory period expires, the rate goes up, often substantially. Before transferring one card balance to a zero percent interest card, make sure your budget can handle paying off the balance on that card in full before the introductory rate expires, or that the interest rate on the new card will be lower than the old card once the introductory period expires. This will keep you from paying excessive fees and interest down the line.
Not using your credit wisely
Many times, a zero balance on a credit card calls to chronic over spenders like a mythical siren’s song. It can be quite tempting to rack up a balance on a card you have just zeroed out after transferring a balance to another card. However, it is important to note that doing this puts you right back in the same predicament you were in before the transfer, and keeps you in a never ending cycle of debt. Balance transfers, when used wisely, are a tremendous vehicle for you to use to get to a point in your life where you are debt free. Continuing to spend on credit, however, does just the opposite. Avoid this temptation and stay on the straight and narrow, even if that means sending a few of your credit cards to the chopping block in the meantime.