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Balance Transfer Introductory Rates Can Mean 0% Interest


You may have seen commercials for credit cards that say something like “0% on balance transfer for 12 months”, or “0% APR on transfer and new purchases for 6 months”. But what exactly does that mean? Which one of those offers is a better offer? And how do you make a balance transfer?

APR is the Annual Percent Rate, commonly called the interest rate, on a credit card. Usually it’s easy to tell which credit card has the better APR: you’d rather pay 14% interest than pay 18% interest. Sometimes a credit card will have a “special introductory rate” for new customers. If you qualify for a new credit card account, you receive a special rate for a period of time, then it changes to the regular rate. The special introductory rate would only apply to people approved for this new credit card offer, not those who already have a credit card through the same company.

What’s the real rate?

A 0% introductory rate sounds great, who doesn’t love paying 0%? But you need to understand 3 things about a special introductory offer:

What does the introductory interest rate cover? Sometimes it’s for new purchases, sometimes for balance transfers, and sometimes for a combination of the two.

How long does it last? Introductory rates could be as long as 24 months. If the 0% APR is for balance transfers for 12 months, and new purchases for 6 months, then you’ll be paying the regular interest rate on new purchases in 6 months, but you won’t pay interest on your balance transfer for a year.

Paying zero is great, but it’s a limited time offer. You need to understand what the card’s true APR is. It may be 1 rate for a balance transfer, and another for new purchases.

How do you make a balance transfer?

A balance transfer is an amount you owe on a credit card, and a new credit card will pay off that balance and then you owe them for the new debt. For example, if you owe $2,000 on an old card with a 15% APR, you could transfer $2,000 from the old card to the new card. Then instead of paying 15% interest on $2,000, you pay 0% on $2,000 for the length of the introductory period. Anything you charged on your new card is a new purchase. A credit card application will usually have on it the fields you need to initiates balance transfers (including the old credit card number). Or you can give them the information by phone or online. The new credit card company then makes the transfer. You don’t need to call you old credit card company or send in anything for the balance transfer.

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