If you are like millions of Americans, you probably shell out more money on interest payments each month than you would care to admit. According to Forbes, the average American household currently has more than $15,000 in credit card debt, and citizens are paying interest on that debt at an average rate of about 13.49 percent. If you are among the many Americans who are only able to make minimum payments on their credit cards each month, you may find you are essentially only paying down the interest and that your actual credit card balance is not getting any smaller over time.
To counter this seemingly never-ending spiral of debt, credit card companies frequently court users with 0-percent balance transfer deals. Essentially, they offer you an opportunity to transfer a high-interest balance to a different credit card, and you will not have to pay any interest on the debt for a predetermined amount of time (often a year, 15 months, 18 months or so).
The appeal to you as a credit card user is that by transferring your high-interest balance, you should be able to put the money you were previously using for interest directly toward the debt. The goal is typically to completely pay off the debt during that designated percent-free interest period before the new credit card company begins charging you interest on it.
Important considerations
While it may seem like credit card companies have your best interests in mind when offering zero-percent balance transfers, it’s important to note that they, too, have something to gain in doing so. Often, a one-time fee is applied when the transfer is made, and this fee is often based on a percentage of the debt being transferred. Additionally, credit card companies know the appeal of a no-percent interest rate may prove too tough to resist, and that many users will not fight the urge to make new purchases while the zero-percent interest rate is active.
Are you a good candidate for a 0-percent balance transfer?
Now that you know how no-percent balance transfers work, you may wonder whether moving forward with one is a good idea for you. If you have a strong credit score and are self-disciplined, meaning you trust in your ability to pay off the debt before the percent-free interest period ends, moving forward is probably wise. Provided you make regular payments and avoid falling into the trap of racking up even more debt, you can save a considerable amount of money and dramatically reduce your debt-repayment period.
If you have additional questions about whether your financial situation makes you a good candidate for a zero-percent balance transfer, you may find it helpful to speak with an attorney.