Ask Stacy: Should I Take Advantage of 0 Percent Credit Card Offers?

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If you live in America, have a decent credit score and can fog a mirror, you’ve probably received promotional offers for very low or 0 percent credit cards.

A $5,000, 0 percent credit line for a year or more can be mighty tempting, especially if you’re laboring under the burden of high-interest debt elsewhere. That brings us to today’s reader question.

I would really appreciate some advice about whether it is a good idea for me to take advantage of the 0 percent balance transfer promotion with one of my credit cards.

I recently came into some unexpected expenses and thought that maybe this might be an opportunity to limit the high interest I am currently experiencing with my credit card, which has more than $8,000 on it and an interest rate of 15.24 percent.

I would have till August of 2015 [at 0 percent], then the interest would increase to 11.99 percent with this promo offer. But I don’t have enough of a limit on the 0 interest card to transfer the whole balance. Should I do it anyway? Or should I try to get my credit limit increased, then transfer it all? Any other suggestions you might have would be greatly appreciated.

Sincerely — Struck by offer but don’t want to make it a financial mistake

The short answer to your question, Struck, is yes. If you can pay zero interest on all or part of an existing balance, you want to. And if you can get the credit limit raised to accommodate your entire balance, you want to do that as well. It doesn’t hurt to ask.

That being said, there are things you need to know about credit cards, especially the 0 percent interest kind. Let’s start with a story I did last year called “Tricks of the Trade: Credit Cards.” Check it out, then we’ll answer Struck’s question in more detail.

Now, here are some things to know about 0 percent balance transfer offers.

It’s possible you won’t get it

Zero percent card offers are normally made to those with good credit — scores of 700-plus. While card companies typically pre-screen prior to making offers, if your credit score changes before you submit an application, they could turn you down.

Offers made by credit card companies are just that — offers. They aren’t guarantees.

Mess up once and you could lose the 0 percent rate

Be sure to read the fine print. Many cards will include conditions, such as paying on time, to retain the 0 percent rate. Make a payment that’s one day late, and you could lose it.

You’ll probably pay a fee

This is the biggest drawback to transferring a balance to a 0 percent card. The vast majority of issuers charge a fee ranging from 2 to 5 percent of the balance to transfer to their 0 percent card.

For example, if you transfer $8,000 to a card that charges a 4 percent fee, you’ll be paying off $8,320.

Do the math

That’s why, before transferring any balance, you always have to figure out how much it’s going to cost you. There are calculators that can help determine just how much you’ll save by transferring balances. For example, CreditCards.com has one here.

I used that calculator to find out what you’d save by transferring an $8,000 balance to a 0 percent card for 18 months, after paying a 4 percent fee. It says you’ll save $1,509 in interest over the life of the 18-month promotional period, then $22 a month thereafter, assuming that you make only minimum payments. Not bad.

Granted, you’ve said you can’t transfer the entire $8,000 balance, and I don’t know the transfer fee you’ll pay to transfer it. So, although the math will probably work out to your benefit, you need to do it yourself.

Check the rate for purchases as well as transfers

Some cards offer a 0 percent rate on balance transfers but charge a different rate on new purchases made on the card, as well as for cash advances. Since the amount you’re transferring will devour your entire available credit line, this probably won’t be a concern to you, but it’s still best to know the terms.

Have you shopped it?

Since applying for credit is a hassle, when you do it, make sure you’re getting the best bang for the buck.

Like many consumer sites, we have a full list of balance transfer credit cards. Some have longer 0 percent interest promotional periods than others, and some have lower post-promotional rates, better rewards, lower fees, etc.

You obviously want a 0 percent promotional rate, but decide on other features you’d like, then take the time to make sure you’re getting the best deal.

Are you using a Band-Aid when you need stitches?

There’s an elephant in the room with any balance transfer: namely, the reason you’re juggling debt in the first place.

As justification for carrying a balance, Struck says, “I recently came into some unexpected expenses.” One-time, nonrecurring expenses are the perfect problem to solve with 0 percent credit offers. But if you’re habitually living beyond your means, a 0 percent card is simply postponing the inevitable day when you reach the end of your credit rope.

Obviously, whatever the source of your debt, paying less interest is better than paying more. But as you make these transfers, take some time to evaluate what got you here and what it’s going to take to get you out. Then, if you need help, get it.

Got a money-related question you’d like answered?

You can ask a question simply by hitting “reply” to our email newsletter. If you’re not subscribed, fix that right now by clicking here.

The questions I’m likeliest to answer are those that will interest other readers. In other words, don’t ask for super-specific advice that applies only to you. And if I don’t get to your question, promise not to hate me. I do my best, but I get a lot more questions than I have time to answer.

Got any words of wisdom you can offer for this week’s question? Share your knowledge and experiences on our Facebook page.

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Comments & discussion

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  • Andrealk

    I’ve noticed that I never get 0% transfer offers from the credit cards that I pay in full every month, only from the ones I carry a balance on. I tried a little experiment and let a balance build up on a card I had usually paid in full…sure enough, within a couple months, I received a 0%balance transfer offer. I think the credit card companies only make these offers on cards that you already have a balance on, because they hope you’ll only make the minimum payments going forward, which means the interest will continue to accrue on the existing balance…and eventually start to accrue on the transferred balance once the promotional period expires. The best thing to do is to first pay off the existing balance if you can, AND THEN accept the 0% transfer offer…then you really have their money for free for the entire promotional period, except, of course, for the up front transfer fee.

  • bigpinch

    Another thing to watch out for, something I ran into the first time I tried to use a 0% balance transfer, is that you have a zero balance on the card before you transfer the large expense to the card. If you have even a small amount remaining on the card, you’ll end up paying the usual rate on the entire balance until the small amount is satisfied. When you make a payment, the credit card company will apply the payment to the larger of the two debts to keep the greater interest rate alive for as long as possible; which means you may never get the 0% you were expecting.

  • N. Gabel

    I’ve used these types of promos before. What I do to make sure I don’t get saddled with debt is take the amount I put on the card and then divide it by the number of 0% months of the promo and then put the resulting figure as my minimum monthly payment on auto pay so I don’t forget. That way I get the best deal. Also, if I can, I’ll pay a little extra each month to speed up the process or drop 1 month off the number of 0% months (say 11 instead of 12) and that way the cc company doesn’t try to pull a fast one on me due to some small print I may have missed. Debt is like a diet, you have to keep at it until you reach your goal . Best of luck to all of you debt crushers !!