0% Credit Card: Purchase vs Balance Transfer Cards

There are two types of 0% credit cards in the market. 0% balance transfer cards and 0% purchased cards. The rates of both of these are of special and promotional nature but still there is a significant difference. One must not get dazzled by the shiny and attractive rates being promoted by credit card issuers. Only when you understand the difference between balance transfer and purchase cards, you will be able to avoid the hidden fees and charges.

0% Credit Cards

Zero percent is just a marketing gimmick of credit card companies to lure new customers. If you take a closer look at the fine print, The 0% rate being boasted by banks is just for the promotional period of approx 3 – 9 months. After that, they start charging you “Huge” and “real” fees and interest charges.

You can not Borrow at Zero Percent!

There are no free lunches in the world, right? similarly, You can not borrow money on 0% interest rate. Interest rates and fees on your credit cards are the only source of income for banks and credit card companies. No bank or credit card company can survive by lending money without charging anything for it

0% promotional rate is for limited time only

After the promotional period is over, the banks starts charging you with normal rates. Length of promotional period can vary from card to card and bank to bank. Generally it can be anywhere between 3 months to a maximum of one year(which is very rare).

Lower Balance First Rule

Since November 2009, credit card companies are applying the payments you make to lower balances first. This means that if there are two charges on your card. one for the 0% promotional rate offer and other is not covered under the promotional rate offer. the company will apply the payments you are making to the charge not covered under 0% promotional rate deal.This is not pretty as the purchases with high interest rates keep adding more charges to your card even when you are making payments. the payments are setting off the 0% balances that you transferred. huh!

They are Looking for Excuse to Charge More!


The Fine print on the credit card application states that if you default or delay any payment, the company can withdraw the 0% interest rate offered. Some companies even use going over limit as an excuse to withdraw 0% promotional offer. There are some clauses in Terms and conditions that let companies increase interest rate, if you have trouble on another account with the same bank or company.

I have seen people loosing their promotional rates just because they have over drafted from their checking accounts. Do you think it is insane? wait till you read next sentence. You can lose your 0% promotional interest rate if your credit score changes or you default or delay payment on any of your credit card or mortgage or car loan.

Even then, its still worth to have a look at the offers available in the market and understand the difference between 0% balance Transfer credit cards and 0% Purchase Credit Cards.

0% Balance Transfer Credit Cards

Zero percent balance transfer credit cards allow you to transfer balances from other cards at 0% promotional interest rate. If you give details of your current credit card i.e. account number, name of bank and amount, the company can settle your debt with your current credit card company. Otherwise they can mail you Balance Transfer Checks that you can use to settle debts and loans up to the available credit limit of your new card.

Fees & Charges

Almost all of the Zero percent Balance Transfer Credit Card Companies charge a fee for balance transfer. Every company charges a minimum of $5 per transaction. Balance Transfers also carry a one time fee that can be anywhere from 1 percent to 5 percent of total balance being transferred. Although some credit card companies do put a maximum limit of $80 to $100. but you have to check that in the fine print.

How to get most of your Balance Transfer
To make most out of your balance transfer deal, you should not use your zero credit card for regular purchases. Because such purchases will carry a standard interest rate and any payments you make will be credited toward your balance transfer and the interest rate on standard purchase will continue to accrue unless you payoff the balance in full.

0% Purchase Credit Cards

If you would like to have a 0% interest rate on regular purchases, this card is best for you. It means you that if you go and shop using this card, you don’t have to pay any interest rate till the end of promotion period. normally the promotion period is around six months to one year. pretty good deal..

What’s the Catch?

The Promotional interest rate of zero person is mostly applicable on certain products and services mentioned in the fine print. For example, a Fuel Credit Card might carry 0% interest rate only for your Gas purchases. Any other shopping you do on that card will be charged with standard rates. Typical examples of such cards include cards issued by home improvement , electronic and furniture stores.

Although you might be able to find a General purpose card with 0% interest rate but such card’s promotion period is shorter than store credit cards. general purpose card’s promotion periods range from 3 – 6 month max.

Word of caution
Make sure that you have read the fine print in detail and you know what will happen at end of promotion period. It is very important to ensure that if you have some balance left on your card, you will not be charged interest rates and fees for the promotion period as well.

Best advice is to payoff the complete balance before the end of promotion period on these cards.

How to Chose Best 0% interest Credit Card

If you understand the difference between 0% Purchase Credit Cards and 0% balance Transfer Credit Cards, you can easily choose one of them according to your need. If you have some balances on high interest credit cards, you should choose a 0% balance transfer credit card. If you want to save money on standard purchases go for a general purpose 0% Credit Card.

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