Credit Card Interest Rate
Benefits of a 0% balance transfer credit card
Not all credit cards are designed for spending money. There are actually a number of different types of credit cards designed with different purposes in mind, one of which is a 0% balance transfer credit card.
0% balance transfer credit cards charge no interest on balances moved over from other cards (and occasionally other debts, such as overdrafts) for a limited period.
This can make them ideal for repaying debt, because you`ll be able to repay the balance you`ve transferred without interest if you can do it quickly enough. In other words, the whole of each payment you make will go towards paying off the debt itself - not towards interest.
On the other hand, if you want to delay repaying your debts for a while, a 0% balance transfer credit card could also be useful for that. If you wish, you can simply transfer the balance across and leave it until your 0% interest period expires, safe in the knowledge that the debt can`t grow in this time. Of course, you`d still have to make the minimum required payment every month.
However, you must have a plan in mind for when the 0% period expires. To avoid paying a potentially high rate of interest, you`ll have to either repay the debt in full by this time, or transfer the debt to a similar deal on another card.
Is it a good idea?
A 0% balance transfer credit card gives you an excellent opportunity to repay more of your debt than you`d usually be able to in a given space of time - or, as we mentioned, delay having to repay the whole amount. As long as you are sure you can afford to repay the debt in the long run, this needn`t cause any problems.
Just remember that if you struggle to repay what you owe at any point you could find yourself in a tricky situation. Remember also that there are no guarantees that you`ll be able to find another 0% interest credit card at the end of your existing deal (and that you`ll also probably have to pay a fee to transfer the balance), so it`s better if you can pay off the debt in full before the 0% period ends.
If you have a debt that you think will take longer to pay back, a longer-term personal loan or standard low-rate credit card might be more suitable.
Compare 0% balance transfer credit cards and a range of other deals with our free comparison tool.
Think Money Limited, 22 November2010
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