Facts about 0% Balance Transfer Credit Cards

A 0% Balance Transfer Credit Card usually refers to a credit card that offers a new user or new cardholder a 0% interest rate for the first six to twelve months after first using the card. Usually, the 0% interest rate is a "teaser" rate that is used to persuade people to use or avail a certain credit card. This comes after a credit card holder transfers balances from one or more unpaid credit cards to the current card. Then the creditor has to pay for those debts using the new card.

Issuers like banks, generally charge balance transfer fees to reimburse the costs they incurred in handling the transfer of the unpaid debt to the current credit card account.

To take advantage of the 0% interest rate that this type of credit card offers, a cardholder must try to transfer debt balances to his current card, then paying for them as quickly as possible. Issuers of this type of card typically offer 0% interest rates on periodical payments for up to twelve months after first using this credit card.

Things to Take Note Of:

Applicants for balance transfer cards should take note of the following facts regarding this type of credit card:

1. Some card issuers disallow the transfer of debt balances from high interest accounts to this type of card during the introductory 0% interest rate offer period.

2. A handful of issuers of this card charge high balance transfer fees that cost as much as $50.

3. If you incur a late payment for even a single payment period, several issuers automatically charge cardholders with very high penalties. What's worse, they could immediately revoke the 0% interest rate privilege and change your card to a variable annual percentage rate (APR) card just for one late payment.

4. Issuers may charge the credit card holder very high interest rates right after the introductory offer period expires.

How to be a Responsible Balance Transfer Card Holder

If you want to take advantage of the short-term introductory benefits of a 0% interest balance transfer credit card, take note these simple tips:

1. Do not apply for this card if you are going to transfer small amounts or a zero balance debt for a previous account.

2. Make sure you choose a credit limit that suits your needs and at the same time complements your current financial status. The issuer conducts credit investigations to determine your ability to pay and the credit limit that you can handle.

3. Understand the long-term details of credit. Make sure that you can handle the interest rate and rigidity of the payment scheme after the introductory 0% interest rate period.

4. Quickly pay for the balances during the introductory 0% interest period. If you are going to take advantage of the 0% interest rate, make sure that you can pay for the balances during the introductory period. This is especially needed whenever a credit card holder transfers a balance from a previously high interest card.

5. Do not transfer large balances to your 0% credit card if you cannot pay for them before the end of introductory period. Failure to pay for the balance would result in the cardholder having a much larger amount to pay for compared to the original balance he wanted to eliminate.

Make sure you understand the costs you will have to incur and deal with using your new 0% balance transfer credit card. Read the fine print in the card's credit terms to make sure you will not get into financial trouble.

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