When debts on your credit cards are attracting high interest rates, you might consider transferring the balance to new card that attracts lower interest rate. This might sound like a simple and enticing thing but consumers need to be careful when choosing a 0 percent balance transfer card. The benefit of using 0 percent transfer comes when you pay back the amount you are owned at the low interest rate within the intro period.
However, if you fail to pay back at the given intro period, you suffer from high interest rates levied after the introductory period. The card you choose should have a longer period of introductory rates. There are cards offering 12, 15, and 18 months of intro rates. The longer the period, the more you are likely to benefit from the deal.
Besides, there is a recent twist on balance transfers where the issuers offer a combined 0 percent transfer with an introductory rate granted on purchases. These hybrid offers can help consumers to enjoy the 0 percent transfers as well as use their cards for purchases. The concept of two-headed credit card balance transfers may be counterproductive especially for consumers who are struggling to get out from high interest rates.
Paying off balance on a card, which is also the mainstream source of spending on inexpensive purchases, can cause troubles. The consumers may be lured to spend more and end up carrying more balances, which they are not able to clear within the introductory period. This could create a cycle of high interest rates thus not achieving the goal of getting out from such hefty rates.
Issuers offer hybrid 0 percent cards to lure customers to spend on the same card. However, if these cards are used properly, they could benefit the consumer in two ways. First, they can enjoy the no-interest rate transfers and at the same time benefit from 0 percent on purchases through the same card. The non-promotional credit card interest rates also need to be examined properly.
Consumer need to look at the interest rates levied after the promotional period. This is important because if your balance is not paid during this period, the rate could be so high. If the card attracts higher interest after the intro period, you better be careful because the plans to pay off your card balance may go awry and you are hit hard by very high interest rates.
It is also hard to determine how your card issuer will apply payment when you are carrying a balance on 0 percent transfer rate and at the same time you are using the card for new purchases. Issuers will mostly apply the total minimum payment to the lowest interest rate debt. This could prolong the repayment time and also the interest charges on the high interest debt.
To avoid dual-interest rates charged on balances, you should refrain from using balance transfers for new purchases. If you critically evaluate the terms of the 0 percent transfer card, you may be able to get one that serves you better and eliminates the balance attracting high interest rate. The aim of getting a zero transfer rate on balance is to get rid of the debt and start enjoying lower credit rates.