Credit Card Rewards

Do you have a balance on your credit card? Perhaps you have created a budget and know in 12 months you could have that balance paid off if you didn’t have to pay interest? If you are in a situation like this there are credit cards that can help called 0 APR balance transfer cards. Let’s take a look at how these cards work and how they can be advantageous to you.

A 0 APR balance transfer card is exactly how it sounds. You have no interest to pay on the balance transfer. The catch is that the no interest ends after a specific period of time. This period may be 3 months to 24 months, but on average you have 6 to 15 months from most credit card companies. You will need to compare the different introductory deals on the market to determine which credit card offers the longest term of 0 APR on balance transfers and whether you can obtain that credit card or not. After the 0 APR deal ends you have two choices: you can pay the balance in full or transfer it to another card with a 0 APR deal. You can also leave it on the card and pay interest on the balance till you pay the card off, but this is not the best method and therefore we didn’t count it as a “real” choice. There are some situations where you might want to leave the money on the same card even if you pay interest. For example, if you have 500 pounds left on the card and you know you can pay it off in two months even with the little bit of finance charges it will be better to leave it on the same card.

There is usually a balance transfer fee. This fee can be 0 to 5 per cent of the transferred amount. For instance, if you transfer 500 pounds you would pay 15 pounds as a transfer fee at 3 per cent for the fee. It is probably about the same amount as the finance charges you would pay in those two months. It is not really cost effective to transfer such a low amount, especially when you consider you would have to open a new credit card to do so. Having too many credit cards open can count against you on credit scores. Closing an older account when you open a new account can also count against you lowering your scores.

This is why you should ideally choose a 0 APR balance transfer cards with a long term introductory deal where you can pay the card off in full before the specified period ends. In this way you pay a fee once and then you pay the card off before the interest is charged. It only works if you do not make purchases with the same card too, since you can always make purchases on a credit card, but you would have to pay interest on that amount.