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What is a zero percent balance transfer? - CCCU

 Tuesday, February 12    CCCU
What is a zero percent balance transfer? - CCCU

What is a zero percent balance transfer?

Find out more about what a zero percent balance transfer is, and whether it’s the right choice for consolidating your debt. We’ll also explain how to use it if you do opt to get one.
 
A balance transfer is a transaction where you combine all or part of the balance on one credit card to another credit card. Many credit cards use a zero percent balance transfer to entice cardholders to switch.

In this blog, we'll be discussing how a zero percent balance transfer works, why you might choose to use a zero percent balance transfer, who is eligible for a zero percent balance transfer, and how you can go about doing one. We'll also touch on finding the best deal for your financial situation and needs.


How a zero percent balance transfer works


Zero percent balance transfers allow you to move your debt from one credit card to another and pay no interest during the promotional period. This promotional period must last at least 6 months, but could last longer depending on the institution offering the promotion. This arrangement is incredibly useful if you are close to paying off the balance. If you’re able to pay it off before the balance ends, it means you’ll be able to avoid paying interest on the remainder of your debt.
 
However, even though this might be a great option for some, there are a few red flags you’ll want to keep in mind. You should avoid making any transaction that isn’t using the promotional rate. If you do this, you may split your payments and end up paying off the wrong charges by accident, resulting in higher fees and not being able to take full advantage of the balance transfer. You will also need to be especially diligent with payments on this account, as missed payments may result in your forfeiting your rate and thus negating the benefits you had accrued. Exceeding your credit limits may also cause this, so be sure to read the fine print when you’re signing up.


Why use a zero percent balance transfer


Zero percent balance transfers allow you to avoid paying interest on your debt. This can help save you money, and as we mentioned previously, if you are able to pay off the full amount before the promotional period ends, you’ll have taken full advantage! Divide the amount you’re transferring by the balance transfer period to find out how much you’re going to need to pay each month to pay off the balance in full before the promotional period ends.


Who is eligible for a zero percent balance transfer


Those with great credit and higher credit scores are more likely to be able to get a zero percent balance transfer than those without. If you have excellent credit, you’ll likely be able to quality for the 0% balance transfer. If not, you can look for a low interest rate as well.


Choosing the right zero percent balance transfer


Choosing the right deal for you is essential. Read the full details of each arrangement and make sure you’re getting what you need. For instance, a better rate in the long run, longer promotional periods, or other perks that financial institutions may be offering.
 
Be wary of other promotional offerings that seem like zero percent balance transfers, but are in fact deferred interest plans. Deferred interest is another type of promotion, where you get an interest-free period, but the interest accrues during the promotional period and if you fail to pay off the full balance before the promotional period ends you’ll end up with all the accrued interest added to your balance… thereby negating the benefits of the deferred interest. 
 
When you’re making decisions about what’s best for you and your finances, don’t hesitate to reach out to a financial advisor or your credit union. Most advisors are happy to help you make the right choice for your financial well being. Feel free to contact CCCU with any other questions about zero percent balance transfers, or other financial deferment programs.


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