Save Money and Reduce your Debt With 0% Credit Cards

by : Mary Wise

If you want to start paying more than the minimum on your credit card bills, this may be the solution for you.

Balance Transfer

Transferring a balance from one credit card to another is basically to pay the whole balance of a credit card with another credit card. Then, the first credit card will be wholly paid off and the previous balance amount will appear on the other credit card along with its own balance.

You may wonder why anyone would want to do such a thing, the answer is simple: To avoid paying interests on that amount. You can save a lot of money by doing so; however, you also need to be careful since there are fees and costs that can turn this operation into a bad financial decision. You also need to compare the interest rates charged on both credit cards prior to transferring the balance even if there is a 0% rate promotional period.

0% Balance Transfer and 0% APR Promotional Period

It's important to differentiate between these two concepts: 0% Balance Transfer implies that the credit card where you will transfer other card balances will not charge an interest rate over the amount you transfer. However, once the transferred balance comes to be part of the overall balance, you'll be charged the credit card's usual interest rate and the minimum payment will rise. The 0% Balance Transfer may last more than a month, if so, you won't have to pay any interest rate till the promotional period comes to an end.

The ') />0% APR Promotional Period on the other hand, is usually offered by credit card issuers when you acquire a new credit card. During this period you won't be charged any interest rate on your new credit card balance, whether the balance comes from a balance transfer or from regular purchases.

Save Money and Reduce your Debt

Both combined, can help you reduce your debt and save money. While the promotional period is in force, all your payments will go towards the principal since there will be no interests at all. You need to make good use of the promotional period and while it lasts, pay as much as you can. Moreover if you want to keep saving money and reducing your debt you can acquire a new card with the same terms and transfer the balance of the previous card before the promotional period runs out.

Beware of Abusive Stipulations and Fees

Credit Card providers are discouraging this practice by reducing the promotional periods, so make sure you read your credit card terms thoroughly before signing anything. A common trick credit card providers use is to charge a small fixed fee for balance transfers instead of an interest rate over the balance. As the balance get's smaller, the fee becomes comparatively more onerous.

As you can see, you can save thousands on interests with 0% Credit Cards, but you need to be specially vigilant and avoid those credit card offers that charge excessive fees and costs for using balance transfers even if they claim to offer 0% Balance Transfers and 0% APR promotional periods.