subject: Getting The Most From Zero Percent Credit [print this page] Credit card companies compete vigorously against each other. They always strive to better their market position. One common strategy is for a credit card firm to expand its customer base by encouraging new customers to join it and transfer their existing debt accumulated in the past on a competitor credit card. The benefit offered to the customer is zero interest cost on that outstanding debt balance.
This no-interest-cost offer typically prevails for only a short time horizon, commonly no more than one year. When the offer period ends, the credit card interest rate returns to the then prevailing level.
Six months or more can be sufficient time for a customer to accumulate enough surplus cash flow to pay off the outstanding balance without incurring any further interest cost. Even if the offer is for only six months, a customer with a debt balance of, say, $5,000 paying an interest rate of 20 percent per annum on credit card debt, the savings accrued by the customer will be more than $500.
For the customer, the actual mechanics of transferring a credit card balance from an old credit card to a new credit card are quite simple. Many customers choose to request the debt balance transfer online when they apply for the new zero percent credit card. Applying for the transfer at that time maximizes the benefit for the customer since the zero interest period commonly begins when the credit card is approved, not from the date the debt transfer is completed.
Once your new zero percent credit card and debt balance transfer is approved, no further action is required by you in regard to the transfer; all the necessary arrangements are completed by the new credit card company. It contacts your former credit card company and pays off your outstanding debt balance. The net result is that you then owe the new credit company that same amount.
The amount of the outstanding debt balance approved for transfer will depend on a range of factors including your new approved credit limit. It is not unusual for all of the outstanding debt balance to be approved for transfer.
An important point regarding a zero percent debt balance transfer credit card is that all payments by you into that account are first directed at repaying the zero rate debt balance. While that balance is positive and a debt amount remains outstanding, all new purchases you make with the card will attract the purchase interest rate. So it is important for you to have a clear understanding what that rate will be since if it is unduly high it can significantly negate the overall net benefit you receive from switching into the new credit card.
It is also important for customers to note that the debt transferred to the new credit card can be reported as a debt by that card before it is cleared as a debt by the old credit card. If this situation occurs, it is likely to exist for only a few days. It occurs for the same reasons that allow one bank to apply a debit immediately funds are withdrawn but a corresponding credit balance being applied by the recipient bank on a delayed basis after it completes its necessary cross-checks.
