I keep getting stuff from credit card companies offering 0% APR on balance transfers. What does this mean? Is it a scam? Or is it worth transfering a balance if you have one?
blade
Annual Percentage Rate.
It’s good only if the new card has a better rate than the last one.
(Note, some regular banks tack on a fee just for doing transfers, but it’s usually not enough to make a difference on which card you want.)
It means they won’t charge any interest on the balance transferred for a set period of time (say six months). When evaluating the offer, you need to read all the terms – does the interest go up; if so, when and to what percentage; is there an annual fee; and so forth. It is not usually a scam, but you still need to be careful.
Well sometimes, it isn’t a scam, but you have to read the fine print. A few of them expire after 6 months (so that should really be 0% 6-mo.PR instead). But most of the time, it can be worthwhile if you don’t like your current credit company or rate.
Pay attention to the actual rate (for purchases, that is) of the credit card you’re getting. Most of those with special offers have really high rates. I suppose you could transfer the amount and then never use the card at all, I don’t think they require that you use the card for purchases, but they might. If I can come up with the idea, odds are somebody at the company’s thought of it too.
Also remember that the interest rates on credit cards are often VERY different for “purchases” than for “cash advances,” and the typically paying off other credit cards is considered a “cash advance.”
What everyone else said. Good deal if you watch the fine print. Also, cancel your old card so you don’t run it right back up again.
Some people take full advantage by “surfing”. That is, getting a new 0% card whenever the old one’s grace period expires (can be up to 1 year). A good way to pay off a card balance w/o paying interest. Careful, though. Frequently applying for and/or receiving new cards is considered a negative on a credit report.
I found that I when I use PayPal for eBay one of my credit cards considers it a CASH ADVANCE and the other doesn’t. So I get different interests.
It should be noted that APR (annual percentage rate) and interest rate do not mean the same thing. The interest rate is the amount charged directly for the loan, usually expressed as an annual figure. APR is the true annual cost of the loan. APR includes the interest rate plus any fees associated with the loan.
For example, if I give you a $1000 loan for one year at 5% interest and charge a $50 processing fee, the loan would actually cost you $100 ($50 interest + $50 fee). I would have to express that to you as “5% interest, 10% APR”.
So while with 0% interest you may still have to pay loan fees, 0% APR means there are no costs associated with the loan. Always compare rates based on APR. A low interest rate is often a cover for higher fees.
Since many cards already offer around 56 days interest free, provided you time your major purchases to catch the monthly accounting period, the 6 months interest free deal is not all that generous, chances are that you would probably pay off quite a chunk of it in those first two months anyway, if you manage your money well that is.
The best deals are the low rate for balance transfers until that amount is cleared off the account, since you can then treat it as a medium term loan, just that it has a very low interest rate, and you can then make direct debit payments from your regular bank account so you know exactly what your monthly outgoings are.
In such cases it is a bad idea to add further amounts to that account as it may well be charged at the usual rate and you don’t start to pay that off until you clear the balance transfer.