The 0% Balance Transfer

Ever been offered a 0% balance transfer by a credit card? Well let me fill you in on a few thing before you go jumping into that mess. I would like to start off by letting everyone know that I have used these 0% balance transfers in the past and with success, however you must know a thing or two before entering into this dangerous world.

0 Percent or 3 Percent

Although the balance transfer will claim that you get 0% for 12 months what you may not know is that a 3% transfer fee will be applied immediately on most offers. This means if your transferring $1000 it will cost you $30 to transfer that balance over. So Right off the bat it's not 0% unless you ask for a 0% balance transfer fee that they may or may not agree to, always ask.

0 Percent Here 16 Percent There

When you make a payment on the card that you transferred the balance to, the payment is first deducted from the amount owed on the lower interest rate balance. What the heck does that mean? Good question, let me show you.

Let's say you transfer $2000 to your shiny American Express card. Also lets assume you had $1000 on that card when you transferred the $2000. So you now have $3000 outstanding. The $2000 balance is 0% and the $1000 balance is 16%. When you make a payment it will deduct from the $2000 first.

So let's say you make a $1000 payment you will now have a $1000 balance on the 0% and a $1000 balance on the 16%. You will pay the 16% interest on the $1000 balance until the 0% balance is paid off. So even though you transferred the balance to avoid interest you are still paying it because of the initial $1000 balance. This same thing will happen if you use that American Express card for any additional purchases. Therefore the rule is, if you transfer a balance to a card make sure your balance is $0 and don't use that card for any purchases until the balance transfer is paid off.

It Takes Time

If you want to transfer a balance allow at minimum 10 business days for the transaction to take place. That means if you have a bill that is due in the next day or two you had better make a minimum payment or you will have a late fee on your hands. If you make a payment prior to the transfer is you will simply have a positive balance with the old card.

It's That Easy

If your thinking about doing a balance transfer just keep these few things in mind and you should be good. Also you should really reconsider playing snakes. Although we can use credit to cover expenses the cost of doing business with them will eventually catch up with us. Reed more about the downsides to credit cards: Are Credit Cards Really "The Devil".