0% Balance Transfer Credit Cards Will Not Last

Have you been attracted to a credit card promising an outstanding interest rate that seems too good to be true? Most of us have at some stage jumped for one of these attractive offers. There are a growing number of providers out there that will offer you 0% deals on balance transfers or purchases. Sometimes they just seem too good to resist!

If you have outstanding credit card balances that you are currently paying interest on, these offers will be tempting. In fact, many 0% balance transfer offers will save you hundreds of dollars on interest. No matter how attractive such offers may appear, you should only take on another credit card if you have taken the time to review your finances and are satisfied that it is the right financial move.

Picture of a jar laying on its side that has various coins spilling out.

The Offer Will Not Last

To look at a typical example, suppose you have one thousand pounds outstanding on a card that charges 10% APR. This means that over the course of a year, this balance will cost you $100 dollars in interest charges. Now suppose you find a credit card that offers you 0% on balance transfers for six months. It is pretty obvious that 0% is better than 10. Assuming there are no balance transfer fees, then how much will you have saved over the interest free period? The answer is 50 dollars. However, what will the interest rate revert to once the interest free period has come to an end? You should be thinking about this before you opting for a card; not when the interest free period is expiring. Suppose, for the sake of our example that the interest rate reverts to a rate of 25%. This means that over the next six months you will pay $125 in interest.

While this is a very simple example, it illustrates an important point when it comes to 0% balance transfers. In the example above if the customer had stayed with his 10% card, he would have paid $100 in interest over one year. In the same period, by opting for a 0% balance transfer for six months that then reverted to 25%, he ended up paying $125.

Remember. just because a credit card offers you 0% does not mean it is the best deal. Look at the long term rates that the card will offer you, and compare these to the rates you are already getting from your credit card. If your existing rate is better than the rates that you will get from the new card once, then maybe you should remain loyal to the card you have.

So while this is going on you will not be spending on the new credit card, but you will be safe in the knowledge that you are saving the interest payments on the old debt.

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