On the surface, 0% APR credit cards might seem incredibly enticing, particularly if you have outstanding credit card balances. However, before taking the balance transfer credit card plunge, there are certain limitations that you should be aware of which are usually hidden among legal wording in the small print.

With more and more people finding themselves deeper and deeper in debt, 0% credit cards are becoming an increasingly popular way to consolidate and manage credit card debt. 0% deals on balance transfers or purchases might appear quite irresistible even to the most credit worthy person, and there are many among us that would jump at such seemingly great offers without as much as a second thought.

On the surface, a 0% credit card balance transfer might appear to you to be the perfect solution to your credit card problems. And if you have a huge outstanding card balance (or balances), a 0% credit card balance transfer will seem a no-brainer particularly because of the way they are presented to the consumer. They are highly effective promotional tools for the banks and credit card companies.

Regardless of your credit circumstances, you should exercise caution and thoroughly investigate all aspects of any credit card offer that you consider. In short, read the small print. Companies often fail to clarify the fine print, hiding the true cost of those offers in the small print. While it would be illegal for a credit card company not to disclose all fees and charges for their credit card, it is not illegal for them to insert them in the small print, and that is exactly what they do. Credit card companies are aware that many consumers do not even bother reading these things, so they stick the truth about 0% APR deals in there.

Let us start with a very typical credit scenario.  Imagine having a $10,000 outstanding balance on a credit card with a 10% annual APR, translating to $1000 in finance charges on a yearly basis. On the other hand, imagine securing a credit card that offers you 0% on balance transfers for the first year of membership.  Transferring your card balance to a 0% balance transfer offer would cut down your annual interest expense by $1000. Exciting, isn’t it?

However, inside that small print, you will often find out that this is for a limited time or only applies to new purchases, NOT balance transfers.

For cards that apply to balance transfers, were you diligent enough to check what the interest rate would be after the introductory interest-free period? The rate might turn out to be significantly higher than your existing card, and you do not want to be caught on the wrong side of a high APR.  You will need to plan ahead – and not just a day or two before the interest-free period comes to an end.  You might be shocked to discover that once the limited time is up the APR usually reverts retroactively to an APR of as much as 30% and beyond. What is worse, some consumers transfer balances thinking they are going to be getting a well earned break from interest and be able to bring that soaring balance down quick, only to find out the offer does not apply to the amount they transfer!

The truth is, if you do not pay off your balance during the period of the introductory offer, more often than not you will be stuck with paying out on an outrageously high APR.  So plan on paying off that balance during the introductory period or you just might regret it.

0% Balance Transfers – A few pointers to bear in mind

Before accepting balance transfers credit card offers, always find out answers to the following questions:

- What will be the interest rate after the initial introductory 0% balance transfer period is over?

-What does the deal apply to? Does it apply to credit card balances?

- Is it comparable to my current APR or will it be significantly higher? What is the net difference?

- If you plan to carry a card balance over time, what will be the long-term net effect of the difference in APR’s?

0% APR credit card offers are not as fantastic as they might initially sound. If your current credit card offers a better long-term ongoing APR than the new one, it is more reasonable to stick with what you’ve currently got, particularly if you have the means to pay off your current card balance.  A balance transfer card most certainly has its own pros and cons but if you wish to use balance transfers to your advantage, it is imperative that you understand the net benefits of the card over the long term.

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