Take a close look before accepting one of these credit card deals.
You probably receive a multitude of offers coming in the mail blasting a 0% APR balance transfer rate. But before you sign on the dotted line, understand what you’re committing to. It’s true: 0% credit card offers may not be your best deal.
What to watch for:
- The 0% APR is an interest-free period on balance transfers or purchases but only for a limited time. When reviewing these offers, ensure you know how long the introductory period lasts. Once the promotional rate is over, rates usually increase, up to 22% or more. Rates can also be variable, which, if you tend to carry a balance, can be more challenging to budget for.
- Most of these cards will assess fees, such as an annual fee, balance transfer fees, and late payment fees. These charges can dramatically increase the cost of your card. Investopedia also cites a 2018 CompareCards study, which notes the average balance transfer fee is 3.46%. (So, for every $1,000 transferred, an average of $34.60 in balance-transfer fees will be collected by the lender. This adds up fast!)
- Speaking of late payments: cardholders are usually required to make the minimum monthly payment to keep their 0% APR. So, if you miss or make a late payment, your card loses its 0% rate and converts to a high-rate (or penalty rate) card. This could be a similarly high rate you’ve been trying to get out of.
- Sometimes 0% APR is really “deferred interest,” which means that after the intro period, the lender will charge the full amount of interest for the entire balance you transferred or new charges incurred during the promotional period. You pay the interest in a lump sum, and this can be a costly mistake.
Not sure where to start? Let us help.
Preparation before you sign on the dotted line will help you to understand any credit card offer – and if you’ll save money in the long run.
To learn more, call us at 616.532.9067. We can help you compare offers, so you get the very best deal!