The Low Introductory Interest Rate Credit Card Battle of 2016

Words low rate written on blue credit cardCredit card companies often times have bad reputations for offering shady and manipulative deals to customers. Although there was legislation passed in the wake of the financial crisis to protect credit card customers, these companies now appear to be returning to their old games. Credit card companies across the Western world are offering 0% balance transfer credit cards with longer and longer 0% periods than ever before. These cards essentially allow customers to transfer the current balance on one card to another, while enjoying 0% interest for a certain period of time after transferring.

The battle for customers has heated up enormously over the years, with companies one-upping each other and extending the 0% interest rate introductory period to record highs. This battle has even extended beyond the US into Europe and Australia, with British and Australian companies increasing their 0% interest periods to record highs as well. These companies are likely increasing this period in order to grab up more customers after the Federal Reserve raised interest rates. Over the next few years, it’s likely that interest rates will slowly tick up and end up costing you more in the long run.

Although these deals may seem like an advantageous opportunity, be careful before signing up with the first company offering you a record long 0% transfer balance interest rate period. Some people believe that if they transfer their balance from a high or medium interest rate card, they’ll be able to save money on interest rate payments. If this strategy is done correctly, it can actually save you money. By transferring your current credit card balance to another account, you could potentially make less interest rate payments. However, this strategy will not work if you don’t actually pay off your credit card balance before the 0% interest rate period is over.

If you wait too long to pay off the balance on your new credit card, you will likely be stuck with higher monthly payments. The problem with 0% balance transfer cards is that they generally have higher interest rates and balance transfer fees than regular cards. Your strategy to save money will be ruined if you aren’t vigilant and pay down your principal. Before signing up for one of these cards, read the fine print. Make sure you aren’t getting yourself into a tough position. Moreover, make sure your finances are in order. You’ll need to pay back your credit card balance one way or another. You can’t put it off forever.

One final word of warning about 0% interest balance transfer credit cards is the fees associated with the transfer. Although you will not be charged interest on the balance you transfer over, most of these companies will charge you a fee for simply making the transfer in the first place. Often times, this fee will be based on the amount you’re transfer to the new card, meaning you may end up paying a large sum initially. It might actually be the case that you will pay more in fees on your new card than you would in interest on your old card. Take a look at the details and run some numbers to see if you’ll actually be saving money in the long run.

Posted on February 12, 2016 by in Credit Cards

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