0% Balance Transfer Credit Cards

But a balance transfer credit card will likely make more sense than a cash back rebate, travel or gas credit card, since any reward benefit from those cards would likely be quickly eaten away if you revolve your balance.  However, it's important to understand that these credit card offers have features that differ considerably from one card to the next. Also keep in mind that an offer that makes sense for one customer's situation might be a bad idea for another customer.

The better you understand 0% balance transfer offers, the greater your chances of making them work to your advantage.

Elements of zero percent balance transfer offers

A zero percent balance transfer offer allows you to take an existing balance from one credit card, and transfer it to the new card while paying no interest on that balance for a specified period of time. As straightforward as that sounds, there are a number of variables involved in these offers:

• The zero percent interest period. The period for which the credit card will forgo charging interest is limited, and that time limit can vary from one offer to another.
• The balance transfer fee. The credit card may be charging no interest on those transfers, but there is usually a one-time, upfront fee for making the transfer.
• Interest rate on new purchases. Even though balance transfers will be free from interest for a while, interest on new purchases may kick in immediately.
• Interest rate on transferred balances. Eventually, those balances will start to be charged interest, and this interest rate may be higher than the interest rate for new purchases.
• Credit limit. As with any credit card, there will be a limit on how much you can charge, and your balance transfers will immediately cut into this limit.
• Miscellaneous fees. Be aware of any other fees the credit card charges.

Be sure you get information on all these variables before acting on any balance transfer offer.

When it makes sense

Balance transfers make the most sense when they are part of a plan to reduce your credit card debt over time. If you have been carrying a balance, gaining a temporary reprieve from interest on that balance can certainly make it easier to pay down principal.

Ideally, if you can time your schedule for paying down your balance so that it coincides with the zero percent interest period on the card, you don't have to concern yourself with what the balance transfer interest rate will be once it kicks in. The longer the zero percent interest period, the more time you have to pay down your debt before you start racking up interest.

What to watch out for

Here are some things to be concerned about when considering a zero percent balance transfer:

• Very short pay-down periods. If you are planning on paying off the balance in a few months, the balance transfer fee might exceed the money you save on interest.
• Very long pay-down periods. At the other extreme, if you don't have a realistic plan for paying down your balance by the end of the zero percent interest period, then you might ultimately find that you've traded up to a higher interest rate. Also, you'll simply be shuffling your debt around rather than really addressing it.
• High new purchase interest rates. If the interest rate for purchases on the new card is significantly higher than on your old card, you'll want to make sure you don't diminish the savings on the balance transfer by racking up more expensive new charges.

Taking the next steps

If you think you can benefit from a zero percent balance transfer offer, here are some steps for moving forward:

• Do some comparison shopping before you apply. Use the resources on IndexCreditCards.com to compare offers. Remember that turning in a credit card application can affect your credit score, so be selective about applying for cards.
• Figure out a game plan for paying down your balance. Use the zero percent interest period as a deadline for your debt reduction plan.
• Make your transfers on time. The zero percent offer may apply only to transfers made shortly after the card is activated, so make sure you don't miss your opportunity.

Used properly, zero percent balance transfer offers can be a good tool for reducing your credit expenses. Make sure to do your research and find the best balance transfer option for you.  This in turn can help with the ultimate goal of paying down your credit card debt.