0 Balance Transfer Cards, What Are They And How Do They Work?
0 balance transfer cards can be an excellent way to reduce either your monthly outgoings or your total debt but what are they and how do they work.
0 balance transfer cards are extremely popular as they offer a means to actually save money by simply transferring your credit card balance or balances, to the credit card provider making the offer, well at least for a period of time anyway.
If you take into consideration the current state of the economy, it is somewhat surprising that the number of people who have large credit card balances increases year on year and this trend shows no sign of slowing down in the future. Unfortunately, many of these people are paying high interest repayments for the privilege of having this debt so it is understandable that 0 balance transfer cards are highly sought after.
If you listen to the statistics often cited by the media and political figures the average APR of a US credit card is around 15% and the average debt for a US credit card holder is $8000. This figure is very misleading as most US households probably owe 25% or less of this figure; a more realistic statement would be to say 5% of credit card users have credit debt of $8000 or greater which is a far more accurate assessment of this situation.
5% of credit card holders still adds-up to a large number of people that have a high combined credit card balance all of whom would benefit greatly from the use of 0 balance transfer cards.
Although emphasis is generally placed upon the size of a debt it must be stated that the size of a debt is irrespective; $1000 of debt is as difficult to deal with for someone with no money as $10000 of debt is and as a result the benefits of zero interest balance transfer credit cards are there for all to use.
How do 0 balance transfer cards work?
Quite simply, credit card companies need customers in order to make money therefore, to entice new customers from their competitors; they offer 0% interest balance transfer deals. These deals usually run for a fixed period of time, usually between 6 to 18 months and offer zero interest on balances that are transferred over from other cards, and may even cover purchases made during the same period.
The removal of the interest element of the repayment benefits the card user as monthly interest makes up quite a large chunk of the monthly repayment saving the user a considerable amount of money for the period of the deal.
If it seems too good to be true it usually is, 0 balance transfer cards are no exception.
Obviously, credit card companies are in business to make profit and for them to totally eliminate their 'pot of gold? would be nothing short of business suicide so there are certain methods they use to make money.
The first method of recouping some lost revenue is by charging for the balance transfer. Usually, a charge of 3% for the balance to be transferred is incurred. If you are transferring a large amount you should be cautious as 3% could be a substantial amount of money although many companies do put a cap or a ceiling on this charge. It is advisable, therefore, that before signing up for any deal, that this is checked out properly.
Another method that is used is to impose a very high APR upon purchases, in this situation it may be wise to have a secondary card that is designed to benefit the shoppers amongst us and use this solely for that purpose, this will avoid any unpleasant hikes in your bills.
Conclusion
0 balance transfer cards are a fantastic way to reduce your monthly outgoings for a fixed period of time but it is also advisable to maintain the same levels of repayments that were made before the transfer therefore reducing your debt quicker.
Always check the terms of the card, an ideal card deal will run for at least 12 months, have few costs for the transfer process, apply to purchases made during the offer period and have an OK APR when the deal is over which is very important.
Unfortunately, these deals are generally only available to people with a good credit history so check before applying.
And finally; credit card companies have become wise to the 'card jumper?. When these deals first began many people used to jump from one card issuer to the next and as a result card issuers were losing out on revenue left, right and center.
Your credit history is scrutinized for the tell-tale patterns of this type of behavior and you will be declined more often than approved if you are seen to be jumping, which doesn't do your credit score any good, so make sure you sign up for a good deal.
There are many pitfalls and things you need to be aware of when you start to use 0% credit cards and many of them are covered at Credit Card Consolidation Loans; Consolidate Credit Debt; or Debt Consolidation Information
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