0% Interest Credit Cards
April 2, 2009 by admin
Filed under Credit Cards
Most people are always on the lookout for good deals, bargains and ways to reduce their monthly outgoings. As part of this, it may be worth examining the costs of those monthly credit card bills.
If a credit card is used and the amount not paid off in full at month end, a balance will be left. The credit card issuer will usually charge interest on this balance and that for the most part is where their profit comes from.
Purchasing by credit card may offer huge advantages – particularly if the balance is paid off in full at the end of each month. However, it is a fact of life that many find this difficult to achieve at times and as a result, fairly hefty interest charges may be levied each month on any outstanding balance that’s more than 1 month old.
The interest rate charged by card issuers varies and it is a good idea to shop around to ensure that the rate being charged is competitive against other card issuers. That’s because it is usually easy to transfer the outstanding balance from an existing card to a new card issued by another company and in the process, possibly save a lot of money.
Credit card issuers are generally looking to capture business from their rivals and typically they will make some attractive offers to try and tempt customers to transfer their balances from an existing card to their card products.
One of the ways many do this is to look for 0% Interest Rate offers. These are often qualified afterwards with the phrase ‘on balance transfers’ or ‘on balance transfers for a period of 6/9/12 months’.
If a card provider advertises a deal of this nature, it means that if the outstanding balance on the card of another provider is transferred to them, then they will not charge any interest on that balance for a given period of some months.
Under some circumstances, this can be very advantageous. As an example, if a balance is transferred under a ‘0% Interest Rate For 6 Months’ offer and paid off in full during that period, the cardholder will have saved 6 month’s worth of interest payments. Even if the balance is not paid off in full, the cardholder will have had the benefit of a 6-month interest payment ‘holiday’ during this period.
It should be noted though that these deals typically offer 0% interest rate only on transferred balances. If the card is used for new purchases during that period then typically those new balances will incur interest at the new card provider’s standard rate.
The new card provider’s normal interest rate charges will usually commence one month after the expiry of the 0% interest period on any balances not paid off. It is worth checking to ensure that these are competitive compared to those of the old card provider before making the transfer.
If a decision is made to transfer a balance so as to take advantage of a deal of this nature, the process is usually simple and quick. An application is made to the new card provider who may perform some background credit reference checks. If they complete satisfactorily the new provider will contact the old provider to pay off or transfer the outstanding balances. It’s done!
- 0% offers on credit cards usually apply to transferred balances
- They may typically be limited to a specified period of some months after transfer
- This can offer significant cost savings to a cardholder
- The rate of interest that commences after the expiry of the 0% period needs to be checked carefully for competitiveness.
