There are two types of balance transfer credit cards on the market. We are going to compare the two options to help you choose between the choices. The first option is the life of the balance transfer credit cards. The second choice is the 0 balance transfer credit cards. To start we will look at what both of the cards mean.
Definitions:
Life of the balance: a credit card company offers you a fixed interest rate deal, with a lower than average interest rate- until such time as the balance has been paid.
0 percent balance transfer: the credit card company offers you a no interest period on purchases you transfer from one card to that companies card (a balance transfer).
Advantages of Life of the Balance:
• The interest rate is normally 1.99 to 5.99 percent.
• The interest rate will not change with that particular balance transfer.
• You have an unlimited amount of time to pay off the debt.
Disadvantages of Life of the Balance:
• There is still a transfer fee.
• It will only be offered once for one balance transfer, any other balance transfers are subject to the regular interest rate.
• The lowest interest rate balance is paid first, thus any purchases or other balance transfers will remain on the card until the life of the balance deal is paid.
• You must have fairly good or excellent credit
• If you miss or make a late payment the terms end.
Advantages of the 0 percent offer:
• You have no interest for a set period of time.
• The average card offers 12 months at 0 percent.
• Most credit scores are eligible for the offer; however lower scores can be a rejection of the entire application.
• There is usually a purchase rate deal on these cards. You can take advantage of the purchase rate or the balance transfer or both.
Disadvantages of the 0 percent offer:
• There is a time limit.
• There is a transfer fee on most cards.
• If you miss or make a late payment the deal is over.
• The lowest interest rate balance is paid first, i.e. a balance transfer is normally paid before purchases.
• When the purchase deal ends you could still end up paying interest on that amount if you have used the credit card for a balance transfer.
It may seem like the life of the balance is in favour, but remember you are still paying interest on the money. If you know you can pay the credit card off in 12 months or less, why should you go for an option in which you still end up paying interest? Your best bet is to understand what you can do and search for a card that matches it, and will of course cost the least amount of money to you. The 0 percent deals are very popular for a reason, and partly because you can keep switching cards for a better deal.
