Using 0% Balance Offers to Pay Down Debt

Chances are you’re receiving weekly offers for credit cards, some with 0% balance offers. While that can be a good deal if you’re carrying a balance at a higher rate, there are some things to be aware of. Here is what you’ll need to look out for in the fine print:

Is there a balance transfer fee? Many cards charge a fee for transferring your balance to their card. While some are a fixed amount, some are a percentage of the balance. If you’re transferring a large balance and the card issuer is charging a percentage of that balance as a transfer fee, that number can become quite large. There are cards that don’t charge a balance transfer fee so look to those first.

How long is the 0% balance in effect? 0% balance offers are “teaser rates” to get you to switch cards. In most cases, the 0% balance will run out, sometimes in just a matter of a few months. You’ll want to determine if the length of the offer is worth the hassle of switching. If you’re using a 0% offer to pay off credit card debt, ask yourself if you can do it in the time period that’s allowed.

What rate will be charged when the 0% balance offer has expired? If you expect to be carrying a balance when the 0% period is over, what interest rate will you be charged and how does it compare to what you’re paying now?

Is the 0% for new purchases or only transferred balances? If the offer doesn’t extend to new purchases and you’re using the card to make them, the interest rate might be higher than the one you left behind.

What is the grace period on purchases and when is the payment due? These are
important pieces of information to have because card issuers will often increase your rate dramatically if you’re late with even a single payment. Not only will your 0% rate be history but subsequent late payments will allow them to increase the rate even higher.

What other fees could be charged? Late payments will affect more than your interest rate. Being late with a payment will also result in a late fee. Fees are commonly charged for being over your credit limit as well. And many cards, particularly reward cards, come with a standard annual fee. Credit card issuers are looking to fees more and more as a source of revenue so you’ll definitely want to take these into account.

0% balance offers can be an important part of a debt reduction strategy. Do your homework to find the best offer you can to help you meet your goals.