We may have heard of a balance transfer, which takes place when we move an unpaid balance from one open credit account to another. The purpose of balance transfer is usually for a lower interest rate. Here, a zero percent balance transfer refers to an action when you move the unpaid balance to a credit card which has a zero percent interest rate for a finite period of time.
Although balance transfer always includes some transfer fee, which is calculated by the percentage of the total balance, a 0% balancer transfer might be the most convenient and effective way to reduce balance.
For example, say that you have a 2000 dollars debt on a card with 12% APR. If you continue making payment on this card and if you are reducing the balance by 200 each month, you need to spend 10 months to finish this repayment. However, you need to pay for around 295 dollars of interest over this period. However, if you could find a card with 0% balance transfer offer, you could transfer your balance to the 0% card. In this way, you only need to pay off your 2000 dollars’ balance in 10 months without any further interests. Even if the balance transfer fee is around 5% for the 0 percent APR card, you will only spend 100 dollars on the transfer process and you still save 195 dollars.
But sometimes it’s also important to familiarize yourself with the terms for credit card with 0% balance transfer. For example, some cards only offer 0% for a limited period, some cards might add the transfer fee into the new balance. What’s worse, for some cards, although offering 0% APR after balance transferring, balance transfer fee is counted as a form that is similar to APR, which means you still need to pay for some interests for your balance in the form of balance transfer fee.