Zero interest credit cards were introduced to lure the best customers from other banks. The new customer completes the forms of the new provider and they carry out all the necessary administration to perform the zero percent balance transfer. The process typically takes approximately 30 days to complete.
Advantages of Zero Interest Credit Cards
- Interest free balance transfer. Given that the typical rate of APR is normally in the 10-20% range, it is possible to avoid paying thousands of dollars in interest each year.
- Reduce credit card debt. Interest avoidance means that a higher percentage of each monthly repayment goes towards debt reduction. Subject to availability and credit score, customers regularly perform a series of low rate balance transfers in order to clear debt.
- Easy transfer process. Once some basic information has been provided, the entire zero percent balance transfer process is taken care of by the new card provider.
Disadvantages of Zero Interest Credit Cards
- Transfer fee. In order to cover any administrative expenses, a financial institution will typically charge a 4% fee.
- Limited promotional rates. Whilst deals were once commonly available for 12-15 months, the term of many promotional offers has been reduced following recent legislative changes.
- Good credit only. Only those who have a good credit score will be eligible for zero interest credit cards. Banks are only interested in attracting customers who are unlikely to default.
- Time of transfer. It normally takes about 30 days for the movement of funds to be completed. This can be a minor administrative inconvenience.
- Reduces credit scores. Performing too many zero percent balance transfers could mean that the lender is more likely to reject an application for credit in the future. Lenders don't simply assess credit, they are also trying to determine whether they can make profit from a new customer.
- Universal default. Should the customer miss or make late payments, the possibility exists that any promotional rate immediately ends. This should be checked in the terms and conditions.
A Zero Percent Balance Transfer to Clear Debt
A zero interest credit card can help the consumer to pay off debt more quickly. In order for this to work, it is necessary to exhibit a great deal of personal control and discipline. Many consumers choose to leave their charge cards at home and/or reduce the credit limit each time some of their debt is cleared. Interest free balance transfers are a cheap way to borrow money, although a debt consolidation loan may prove considerably easier to manage because it has a defined term at which point the debt is repaid.
Asa Ghaffar - Asa has over 10 years of practical experience in loan approval, secured lending, bad credit repair, stock trading and debt management.
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