A Few Facts With Regards To Balance Transfer Charge Card Accounts
A few years back, ’0 APR on balance transfers charge card accounts’ was a common noun in the financing industry. While getting a 0 APR on balance transfers for life was a rare deal even then, today, due to the credit crisis, even the number of institutions offering 0 APR on balance transfers for 12 months has come down drastically. This article delves deeper into what ’0 APR on balance transfers’ means, the uses of 0 APR on balance transfers and the ‘do and don’t’ information on 0 APR balance transfers. Before we move further though, you can brush up on your financial concepts first, by reading the article APR vs interest rate.
The 0 APR on Balance Transfers Concept
Essentially, 0 APR on balance transfers means an offer that claims to charge no additional interest on the transfer of balances from one financial instrument to another. For a normal borrower, these are ‘charges free’ offers to transfer balances from interest bearing financial instruments to 0% interest bearing financial instruments. In layman’s terms, if you have a debt that requires you to pay, say about a 7% interest in it, you can get it transferred to a 0 APR balance transfer credit card and save on your future interest payments, that you would have otherwise made on your initial debt. To make this even more attractive, some charge card companies even advertise a ’0 APR on balance transfers, no transfer fee’ offer. In fact, some 0 APR on balance transfers charge card accounts also come with other attractive schemes like cash back offers, rebates, reward points, higher credit limits, etc. Sounds too good to be true, right? Know more on charge card account debt.
Uses of 0 APR on Balance Transfers Credit Cards
If you are someone who is overburdened with high interest rate debts, 0 APR on balance transfers charge card accounts offer you the perfect way to save some cash. Let us have a look at some of the uses of this debt reduction facilitating instrument. Know more on credit card debt consolidation.
Many high interest bearing credit card accounts disallow debt consolidation in their terms and conditions. In such a case, you can use 0 APR balance transfer charge cards to pay off these higher interest debts and substitute your high interest payments with really low ones.
For unexpected extra cash needs or to support high expenses, one can use 0 APR on balance transfers credit cards to get that additional cash infusion. Most of these 0 APR balance transfer charge card accounts make direct money transfers into your bank accounts and hence, are mostly hassle free.
You can use 0 APR on balance transfer charge cards to make high yield savings. You can borrow cash at interest rates as low as 0 % APR and invest them in banks that offer higher annual percentage rates, say about 5%. This way, by taking no high risk positions and just through the transfer of money from one account or instrument to another, you can earn hundreds of dollars.
Dos and Don’ts of 0 APR on Balance Transfers Credit Cards
Contrary to the impression one gets from the 0 APR on balance transfers scheme of credit card companies, they are not stupid and this is not a non-profitable offer for them. 0 APR on balance transfers charge card accounts are just meant to lure borrowers into the debt business. One mistake in payment and they are saddled with enormously high APRs and worse terms and conditions. So you see, the charge card account companies do stand to gain a lot from these credit cards. Yet, if the borrower takes care of a few ‘do’s and don’ts’, he is effectively borrowing money for free, a boon beyond imagination. Here’s what a borrowers must be careful with, in order to get the better end on the bargain in 0 APR on balance transfers charge cards.
Read all the clauses carefully in the terms and conditions document before signing yourself up under the scheme. In some cases, the 0% APR on balance transfers scheme is only introductory and only lasts for a few months after enrollment. On expiry of the designated period, the borrower is actually charged an interest rate. Make sure you know the rate and you know exactly when it will be applicable to you.
All 0 APR on balance transfers charge cards do not come with the ‘no transfer fees’ clause. If your card has transfer fees, find out exactly how much it is and in which cases it would be applicable (some credit cards even consider convenience checks to be balance transfers).
Make sure that you always pay your due payments on time. As I mentioned earlier, this scheme is just a lure and the credit card account companies are just waiting for you to delay or default, so that they can charge you inflated interest rates from then on. The best way to ensure that you are not saddled with a shocking 20% APR as penalty, just set up ‘automatic payment’ from your bank account.
Keep an eye out for any changes in the credit card company policies. For example, be prepared for early payments if the company suddenly decides to reduce the payment grace periods.
It is more prudent to not apply for a balance transfer along with the main application. Get approved first and then apply for balance transfers later and know your credit limit before actually you do so.
Look around for all the available options before you choose your 0 APR on balance transfers credit card accounts. Some good options are the Citi Platinum Select Mastercard, the Discover More Card, the Miles Card by Discover, the Chase Slate Card, etc.
While the pros of 0 APR on balance transfers cards are good many, you might be worse off due to them. If you fall in any of the following categories of borrowers, it is recommended that you do not apply for them, lest you go from crisis to catastrophe overnight.
If you have poor credit scores or have a credit history of carrying frequent balances, 0 APR on balance transfers are not for you. With your immaturity in handling debt, there is a higher probability of you falling into a debt trap and piling on even more debt than before with the use of 0 APR on balance transfers charge cards.
If you require an excellent credit score for something (like a mortgage application or loan) soon, balance transfer charge card accounts may not be suited for you. The idea will serve you best if you pay off all your balances a few months before you apply for your mortgage loan, so as to give your credit scores time to recover and improve.
If you frequently forget to pay your bills, you are exactly the kind of customer that credit card companies are hoping to lure with 0 APR on balance transfers charge card accounts. One late payment and your will be saddled with an APR probably higher than 20 percent. Think about this, weren’t you better off before you took the 0 APR on balance transfers charge card accounts bait, in this case?
Before I end this article, I have some vital piece of information to give you. Don’t wait for better deals in the field of 0 APR on balance transfers charge card accounts, for you may be waiting for ever. With the credit scenario changing almost everyday, what you’re getting today may not even be there tomorrow. Make hay while the sun shines.
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