A method some people think looks fairly safe and enticing is the offer they receive in the mail: You qualify for a platinum credit card that has 0% APR for balance transfers! Of course it sounds good, why wouldn’t it? But as useful a 0% balance transfer card can be, there are several little traps you must watch out for in order to make the most of the card.
As with any credit card, you absolutely must read the fine print. Failing to do so can lead to a swift kick in the rear later on. The fine print is there because companies are required to give you all the information. They just happen to do it in legal jargon and in a tiny font. Reading the fine print can reveal a lot of information that is not printed on the front where the big, bold 0% APR balance transfer is located. Balance transfers usually come with two very important pieces of information; how long they last and what the APR is once they do.
The life of the 0% APR offer can last anywhere from 3 months to a year. If you are considering using a card with a 0% offer, you need to do a few calculations first. How many credit cards do you currently own? This is important because opening too many can damage your credit report. How much debt do you currently have? This is even more important because if you have a total of $10,000, will you be able to pay that off in 3 months to a year? Many people have even more than that on their combined cards, so knowing very clearly what you can and cannot handle in terms of payment is key.
Once the promotional period ends, the real APR will kick in. This APR could be anywhere from 10% to over 20%. The lower the better because you do not want to be paying 20% on your remaining $8,000 when split apart, your combined APRs might have been only 15%. A high APR after the promotional period can sometimes negate all you have worked for previously under the 0% offer. The extra catch to this is that if you use this card, the new amount you put on it will not be tacked onto the balance you transferred to the card. That means the new balance will only be affected by the regular APR of the card, which may be nice and low. Great, right? Not quite. Now, not only are you paying two interest rates, but the next time you send in a payment it will go toward the new balance first, old balance later. So your payment may not make a dent in your old balance, leaving it to sit and accrue more interest.
It is possible to successfully navigate a 0% balance transfer card. Many people have been able to do so. If you can crunch the numbers the right way, it can be an effective method of consolidating your credit card debt and erasing it from your sight.
