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Take Advantage of 0% APR Transfers
December 1st, 2013
Take Advantage of 0% APR Transfers

Originally used only sparingly by issuers, 0% APR transfer cards have become a staple within the modern credit card industry, and are offered in a wide variety of formats. 0% APR transfer cards can be a great way to save money while paying down existing debt, but they can present consumers with some easily avoidable pitfalls. In this article, we'll define what a 0% APR transfer card is, as well as discuss some of their advantages and disadvantages, all aimed at helping you decide if a 0% APR transfer credit card is the right choice for your specific situation.

First, let's define what we're talking about.

What is a 0% APR transfer credit card?

According to Investopedia, a credit card balance transfer is "The transfer of all outstanding balances from one credit card to a new credit card. Credit card balance transfers are typically used by consumers who want to move their debt to a credit card with a lower interest rate." In the instance of a 0% APR transfer card, the new interest rate would be zero.

Sounds great, right? Not so fast. While it's true that 0% APR transfer cards do come with a wide array of benefits, there are also several drawbacks that savvy consumers can avoid. As with all forms of credit, you need to make sure you read and fully understand your user agreement before signing on the dotted line. As a result, we've compiled a few of the advantages and disadvantages of 0% APR transfer cards, which you'll find below.

What are some of the advantages of a 0% APR transfer credit card?

1. The ability to reduce debt. If you transfer debt from a card that carries a higher interest rate to one with a 0% APR, this means you will be able to avoid incurring interest charges. Ultimately, this allows your payments to be applied directly toward the principal, instead of being eaten up by interest. Consequently, this will also...

2. Increase your credit score. By reducing your overall amount of revolving debt, your credit (FICO) score will improve. As a result, this can make it easier for you to obtain future credit cards, as well as other types of loans.

3. Additional rewards. Depending on the bank issuing your 0% APR transfer card, you may be eligible for additional benefits such as cash back for any new purchases in excess of the balance transfer, in addition to added points that can be redeemed for anything from airline miles, to exclusive merchandise available only to cardholders.

What are some of the disadvantages of a 0% APR transfer credit card?

1. The introductory period will expire. This means that your beautiful new 0% APR will increase, sometimes drastically so, after a period of anywhere from six to 12 months. Also, the higher interest rate is typically retroactive, meaning that the higher interest rate will be applied to the full balance that was transferred, not just to your remaining balance.
For example: Let's say you transferred $10,000 worth of debt to your new 0% APR card, which you reduce to $5,000 over the course of six months. At this point your introductory period expires, and your APR skyrockets to 21%. Instead of paying this vastly increased interest rate on just your remaining balance, it will be applied to the full $10,000 you originally transferred, and will have accrued for six months. In this example, this means that even if you pay off the remaining balance immediately after your APR is increased, you will be charged an additional $1,000 in interest.

2. High interest rates. It's not unusual for 0% APR transfer cards to carry interest rates of 19% or higher, not only after the introductory period expires, but also on all purchases made after the transfer has been completed.

3. Steep penalties. If you're late on even one payment during the introductory period, even if it's only been two months since the account was activated, the 0% APR is typically null and void, and the default (read: much higher) interest rate will kick in. You may also be subject to steep late charges.


Just like with anything else in life, you have to take the good with the bad. So, after all is said and done, only you will be able to decide if a 0% APR transfer card is right for you. However, here are some points that might help you decide:

1. Make sure you're not overextending yourself. In other words, do you really need to take out an additional line of credit? If so, will you be able to significantly reduce the balance, or completely pay it off, within the introductory period?

2. Understand your user agreement. You're likely to find this a running theme within the credit card industry, but only because it's such an important point. Thoroughly read through your 0% APR transfer card's user agreement, and if you come across anything you don't understand or require additional clarification on, be sure to contact the card issuer before you sign on the dotted line.

3. Do your research. What are the different types of 0% APR transfer cards available? Do you need one that has a longer introductory period, or one that offers additional membership benefits? We've compiled a list of some of the most sought after 0% APR transfer cards here, and we're sure you'll find one that meets your unique needs.

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