With the battle for credit card customers hotting up, card issuers are vying with each other to make increasingly attractive offers for consumers. Credit card borrowers are spoiled for choice, and can now transfer balances from one card to another without even paying interest rates on it for up to 2 years.
But is it ideal to choose a zero-interest credit card primarily because it offers the longest interest-free period? Not necessarily, since other factors may influence your choice of low-interest credit card.
One of them may be the "transfer fee" which is a levy imposed by credit card companies on consumers who plan a balance transfer from older cards. The transfer fee can vary widely and usually depends upon the amount of debt transferred. A high transfer fee can negate the advantages of low interest rates. Make sure that you know what transfer fee your new credit card company will charge before signing up for any contract.
Transfer Fee Versus Longer Interest-Free Period
Imagine having an outstanding credit card debt of ,000. You can transfer it over to a zero-interest credit card that offers you 26 months of interest free credit, but will charge you a higher transfer fee. Or you can save on transfer fees with another company that has a shorter interest-free period followed by higher interest rates.
When other things are almost equal, the credit card with a lower transfer fee will cost less by way of interest, in comparison to one with a high transfer fee and a longer introductory interest-free period. This is because the extra time of zero-interest is rather short and won't make a big difference in terms of saving money on interest for unpaid debt.
How To Avoid Interest
One of the major reasons for transferring outstanding balances from your previous credit cards to a zero-interest card is that you will clear any unpaid balance in advance of the date when the annual percentage rates (APR) kick in. This is why longer zero-interest periods are more desirable.
Based on your capacity to repay the debt amount, you may find a particular credit card is better suited to your needs. By computing your monthly payment dues that will help you clear the outstanding debt before your interest-free period ends, you will be able to compare two options and decide which one is more practical and suitable for you.
Avoiding Transfer Fees
At the end of the interest-free period, if you find yourself stuck with a lot of debt that is now subject to your APR, you should consider moving the balance once again to another zero-interest card. But check to see that the card will not charge you a fee for balance transfers.
While you may not have to pay a monthly fee with these cards, you will still be charged interest on your debt. However, the APR will typically be much greater than your interest on credit card debt that averages 17.3%, helping you save money.
Before choosing a zero-interest credit card company, make sure to carry out extensive research on the Web or offline, to compare the various features in a range of credit cards. By using online tools, you can carry out these searches anonymously, sidestepping the possibility of leaving a digital footprint on your credit record.