What Is 0% Balance Transfer

If you plan to pay back a credit debt, but do not have enough cash for it, then there is one way that you could possibly try, and that is a 0% balance transfer. This is a scheme that credit companies promote to attract potential customers and to maintain the debt held within the accounts. To repay the credit of the previous account, you can take out this new credit card account with 0% interest and repay the previous credit debt.

This scheme however doesn’t last for long and has a limitation of only 6 months or at most one year. After this time you have to pay the required interest, so use the months effectively for repaying the debts. This scheme is quite profitable for creditors but for borrowers too it could be well affective if the proper use is understood.

Before applying for the scheme however, you have to know the timeline of the promotion as each of the companies have their different timelines, and within that timeline you have to understand your budget level.

Remember that the payment has to be done before the promotion period ends, or you will end up paying interest rates for BOTH the credit companies!

Calculations for 0% Credit Balance Transfer

When transferring balance, a 3% standard fee is applied, but you have to decide whether enough money will be saved to make the 3% fee worthwhile. Depending on your credit scores and also on the credit company, there can be around 5% to 20% interest rate and this amount is critical for your monetary situation.  If a balance transfer is just for six months then considering you have $1000 balance then you will have to pay a fee of $30 to save $23.37 in interest. On the contrary if the balance transfer is of a year then there will be a rate of $12. Now it’s up to you to decide if the transferring is worth the shift or no.

Now considering you have a 15% interest on the credit card along with $1000 balance and payments at 3%/month then tehre is $71.66 interest in six months and $134.94 in interest over the year. And finally for a 20% interest rate, you will pay $96.59 in interest over 6 months and $184.48 over a year. As it is, the higher the interest rate, the more of a need to do a balance transfer.  Considering all these options, you should take on a balance transfer only if your financial status is good enough. Always remember to get professional help and guidance in these acts, as you may never know what is hidden in the box until and unless you don’t understand the terms and conditions well. Also do not take balance transfer for granted, as if you are not careful about them, you might just find yourself in great debts.

People who liked this Post also read

  • 20 Most Important Terms To Know About Home Loans
    Before Opting home loans, it is important to learn about few most important terms related to home loans....
  • Costs and Fees: When is a ‘Fixed’ Rate not Fixed?
    Each card agreement is different from the other, so here I will answer your questions in a more general way. A card issuer has got the right to change the interest rate of your credit card account by giving a notice in writing to the cardholder. Being a c...
  • How to Get Quick Approval for a Mortgage
    It is quite difficult to get approved for a mortgage. The lender is looking for a lot of guarantees. You might get rejectd several times. It is important that you understand a few basic things you can do to get approved for a mortgage....
  • Benefits of Credit Card Debt Consolidation Loans
    By and large customers have numerous debts to pay. The high interest rate makes the repayment more difficult for them. In this regard debt consolidation loan especially for the repayment of several credit card loans with one loan is a good choice. However...
  • Interest Only Home Loans
    A person who is planning to buy a house but finds difficult to pay both principles and interest so for such kind of people interest only home mortgages option is open in which a consumer has only to pay interest money at very low rate during beginning yea...

is an experienced journalist.

Leave a Reply

CommentLuv badge

© 2011 Loan Mortgage Credit!. All rights reserved.