No interest credit cards are a godsend if you’re trying to get out from under credit card debt. They allow you to pay down your balances more aggressively because you have a temporary reprieve from paying interest.
But not all balance transfer credit cards have zero interest. If you think you won’t be able to pay off the balance during the limited-time 0% APR period, it might be better to choose a card with a low ongoing interest rate. Even though you won’t have that no interest interval, you might save more money in the long run.
Keep in mind that there are many good reasons not to open a new card at all. Applying for a credit card results in a hit to your credit score of about five points, and if you’ve already nearly maxed out your existing cards or have a very low score, you may not be able to get approved for a card with good terms. In such cases, moving balances to your existing card with the lowest interest rate might be your best move.
But let’s assume you’re opening a new zero interest credit card and transferring balances from your existing cards. Here’s what to look for:
Transfer fees
It’s usually not free to transfer balances. Although there are a few cards out there without transfer fees, most no interest credit cards charge a percentage of the balance every time you move money onto the card. Look for a card with a low fee of 1 or 2%.
Short-term relief from interest
Zero interest sounds great, but how long will it last? Many 0 APR credit card offers sound great, but the interest holiday expires after only a few months. Look for an offer with an interest free period on the longer side, usually 15 to 18 months.
Super high rates once the low rate expires
The last thing you want is to end up with sky-high rates and be unable to apply for a new balance transfer card when the time comes. Look for a card that has rates below 20% after the no interest period expires. Be aware that most cards have variable rates and the actual rate may be higher when the time comes.
Low annual fees
Credit card companies are businesses too, and if they aren’t charging you interest, they’re looking for other ways to make money. Balance transfer cards with no annual fees do exist, but you may end up paying something. Anything above $100 a year is probably too exorbitant, and you should look elsewhere.
The bottom line is that balance transfer credit cards are a tool to help you get out of debt. They shouldn’t be used to prolong overspending habits. Eventually interest rates are going to kick in, and you’re going to want your balances to be as low as possible when that happens.
Juggling credit card bills photo via Shutterstock.
The post Do All Balance Transfer Credit Cards Have a 0% APR? appeared first on NerdWallet Credit Card Blog.
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