If you use 0 balance transfer credit cards to pay down debt you usually have to set the card aside. But, if you can get a zero deal on the transfer and purchases your card doubles its value. These offers are not very common, but when you find one you should jump on it.
0 APR balance transfer credit cards are used to get out of debt. You would take the balance of one or several credit cards that have a high interest rate and move them to the new card that has a zero interest rate. The savings in doing this is obvious. The one thing to keep in mind is those rates are introductory which means it is important for you to pay off your debt before the rate expires. Once it does you interest will revert to a higher rate and it could offset your original savings.
The common advice on these cards is not to use them for anything other then the balance transfer. This is because 0 APR balance transfer credit cards, like most cards, operate under negative payment hierarchy. What this means is your bill is paid off in order of the amount of interest the credit card company is earning on it. So, the lowest interest rate transactions will be paid first. Once they are paid in full it moves to the next lowest rate and so on. Purchases usually fall into that category. If you have transferred a balance it could take three months or more for you to pay it off, all the while any purchases you make with that card are gaining interest.
The one way around this is if you can find 0 APR balance transfer credit cards that also have zero interest on purchases. This allows you to make purchases and pay nothing in interest charges on either bill. You have to make certain that these rates are good for the same length of time as the balance transfer. If not you will also fall into the above mentioned negative payment hierarchy trap. Cards like this are few and far between, especially here in Australia. But, if you are able to find one you should snatch it up as quickly as possible and take advantage of this great deal.
Neither the 0 APR balance transfer credit cards deal or a zero purchase deal lasts forever. It is very important that you make the most of your savings by clearing both debts before the introductory period expires. If you do that you will have paid off your old debts with no interest and gotten a six month loan basically for free. Perhaps this is why these deals are so hard to come across, credit card companies do not like doing things for free. Do a bit of research and keep your eyes open for these great deals.
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Posted on Monday, March 29th, 2010 at 11:30 am
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