[Update: Some offers mentioned below have expired. You can view the current offers from our partners here — Slate card from Chase and the Discover it card. Disclosure: Cards from our partners are mentioned below.]
Are you in debt left over from the holidays? If so, then you may be able to pay it off sooner if you perform a balance transfer to new account with 0% APR promotional financing. (These cards generally require good or excellent credit scores, so it’s smart to check your scores — you can get two for free from Credit.com, updated every 14 days — and be relatively confident you’ll be approved before you apply.) As the name suggests, these offers allow new account holders to transfer a balance from another card and avoid interest on those charges for at least six months, and as long as 18.
Nevertheless, obtaining one of these offers will not magically eliminate your debt, and there are several ways that this strategy can backfire. So if you will be applying for a credit card with a promotional balance transfer offer, make sure that you avoid these common mistakes.
1. Not Applying for the Best Offer
Thankfully, there are many credit cards that offer some form of interest-free promotional financing. Federal law now requires that these offers last for at least six months, but the most competitive offers last for 15 for 18 months. So if you have a lot of debt and can benefit from one of these offers, don’t sell yourself short by considering an offer that lasts a year or less.
In addition, the same card might be available with multiple offers. For example, the Discover it card is offered in a version with 18 months of interest-free financing on balance transfers and six months on new purchases, or a version with 14 months of financing on both new purchases and balance transfers. Otherwise, these cards’ terms are identical.
Finally, applicants should consider the Slate card from Chase, which is currently the only 0% APR balance transfer offer with no balance transfer fee. Slate features 15 months of interest-free financing on both new purchases and balance transfers, but doesn’t have the 3% balance transfer fee found on all other interest-free financing offers.
2. Trying to Transfer a Balance Between 2 Cards From the Same Issuer
Although this term is rarely spelled out, a bank will not perform a balance transfer between two cards that it issued. From the bank’s perspective, the purpose of a balance transfer is to acquire a new customer and an existing debt, not to allow existing customers to avoid interest charges.
3. Performing a Balance Transfer When You Can Pay Off Your Debt Quickly
Since nearly all promotional balance transfers require a 3% balance transfer fee, cardholders who pay off their balance within a few months may actually pay more in fees than they would have paid in interest, especially if they already have a low standard interest rate. For example, a cardholder with a balance that is incurring interest at a 12% standard interest rate would be better off steadily paying his or her balance off within three months rather than incurring a 3% balance transfer fee.
4. Waiting to Perform the Balance Transfer
Credit card interest charges are based on an account’s average daily balance, so each day that cardholders fail to transfer their balance is another day that interest charges are assessed. So as soon as you are approved for an account with a 0% APR promotional balance transfer, you should contact the card issuer and begin the process.
5. Not Paying Off Your Debt Before the Offer Expires
Perhaps the most dangerous mistake that cardholders can make is to use a promotional balance transfer offer to postpone paying off debt. It can be tempting to use the interest-free financing as an excuse to procrastinate and avoid repayment, but this will only make it easier to stay trapped in a cycle of debt. By making regular payments, with the goal of paying off the balance before the standard interest rate applies, cardholders can gain the maximum advantage from these offers.
At publishing time, the Slate card from Chase and the Discover it card is offered through Credit.com product pages, and Credit.com may be compensated if our users apply and ultimately sign up for this card. However, this relationship does not result in any preferential editorial treatment.
Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.
More on Credit Cards:
- The Credit.com Credit Card Learning Center
- How to Lower Your Credit Card Interest Rates
- 6 Smart Credit Card Strategies