Interest Free Credit Cards:  A Smart Way To Consolidate Credit Card Debt.

One of the most popular moves that consumers use for credit card debt relief to take advantage of interest free credit cards and their balance transfer options.  0% balance transfer credit cards can save you $150 to $200 for every $1,000 owed (assuming your high interest credit card rate is around 15-20% APR.).  If you carry a large balance on one or more credit cards, a smart balance transfer can create significant savings.

How To Evaluate Interest Free Credit Cards

When evaluating multiple 0% interest credit card offers, you should apply for credit cards with the longest interest free period and the lowest overall balance transfer fees.

Understand that, in these tough economic times, you will have to have an excellent credit score to get the best 0 interest credit card deal.  On the other hand, interest free credit card offers are still available to people with average credit ratings with higher balance transfer fees and shorter interest free terms.  So, don’t give up trying to consolidate credit card debt.

Do Not Overlook The Impact Of Balance Transfer Fees

Until recently, the standard balance transfer fee on an interest free credit card offer was 3%.  That made a 0% APR credit card offer (with an interest free period of 12 months) have an effective balance transfer APR of 3%.  However, if the 0% APR credit card offer only lasts 6months, the effective balance transfer interest rate doubles to 6%.  Recently, several credit card companies have increased the balance transfer fee to 4%.

So, keep that in mind when you evaluate multiple 0 interest credit card offers.

Also, even though there are still a few credit card issuers that cap their balance transfer fees at $50 to $75, many credit card companies are removing those caps.

How About An 0% APR Interest Rate On Purchases?

Many interest free credit card offers also have a 0% APR on purchases.  This is a significant benefit so long as the interest free term is the same as for the 0 APR balance transfer offer.  If the 0 interest APR expires before the 0% balance transfer offer period, do not use the card for purchases.

Remember, credit card issuers apply payments to pay down the balances with the lowest interest. If the interest free period expires prematurely, the purchases would accumulate at the standard purchase APR rate (which could be as high as 19.99% APR).  So, you would not even begin to pay down this balance until all of your 0% APR balance transfer was paid in full.

Does The Interest Free Credit Card Offer Extend To Cash Advances?

If your interest free credit card offer extends to balance transfers as well as direct deposits into your checking account, you have the option of using the 0 interest credit card for other things, including, but not limited to, paying down other unsecured personal loans.

When In Doubt, Be Able To Bail Out

Have an exit strategy in place before you take advantage of an interest free credit card offer in case you are unable to eliminate the balance before the end of the 0 APR period.  Otherwise, you could get stuck paying high interest rates on any outstanding credit debt balances.  This will quickly undermine the interest saved during the interest free credit card period.

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Let’s take a look at some of the factors that will allow you to take advantage of the best 0 interest credit card offer.

Choose Between 0% APR Introductory Rate Or Lowest Fixed Rate

Most of these credit cards will offer either a low interest rate for the life of the balance or a 0% introductory interest rate for a fixed period of time.  If you are really lucky, they will offer both.

So, which is more important, getting the low fixed interest credit card or a 0% credit card for a shorter period of time?

Well, it depends…

When A 0% Credit Card Is Right For You

If you’re transferring an existing credit card balance, a longer 0% APR credit card is almost always the best option. You will not pay interest on the balances that are transferred so you should save money (depending on the length of the 0 APR credit card rate and the amount you transfer).

Be careful of the transfer fees though.  These can range from 3-4% of the balance transferred.  So, you need to calculate the effective interest rate of the fees on the balance that you transfer.

Note that a 0% credit card is also a great plan for charging purchases initially and paying them off before the 0% APR period is over.

When A Low Interest Fixed Rate Is Right For You

If you are planning to pay off long-term purchases or do not need to transferring other balances, then a low fixed interest rate credit card will be a better choice.

Remember, you still might be able to have the best of both worlds if you can find an offer that provides both a 0% APR introductory rate and a low fixed rate thereafter.

Factors:  0 APR Or Fixed Interest Credit Card

Here are the most important factors that you need to apply when deciding whether a 0% APR credit card or low, fixed interest credit card is right for you:

• 0% APR Introductory Time Period. Look for the card with the longest introductory period. The typical length is anywhere from 3 to 12 months. If a 0% APR offer is available and all other factors are equal, consider it first since you’ll save the most money during the intro period.  But watch out for balance transfer fees.
• Fixed Rate After The Introductory Period Is Over. What will be the APR after the introductory period is over? Check to see whether or not there are different APR rates for cash advances and new purchases.  The credit card with the lowest interest rate will save you the most money over the life of the loan.
• Credit Card Fees. Is there an annual fee or other fee associated with the credit card.  Most important, what is the balance transfer fee for any balances that you may wish to transfer.  Sometimes, the size of the balance transfer fee coupled with a short introductory rate can effectively nullify the benefits associated with a 0 interest credit card.
• Grace Period. What is the length of time from the date of a purchase until interest is actually charged. The average length has shrunk to about 20 days. Don’t worry about this factor if your primary goal is to transfer a balance.  However, all other things being equal, pick the card with the longest grace period.
• Rewards. Do you get airline miles or free hotel rooms?  If you can take advantage of these rewards, they can really add up.

Look For 0% APR Credit Cards Whenever Possible!

The interest savings could be huge.  But make sure you have a good credit score before you apply.  Credit card companies will scrutinize your credit report to determine if you can qualify for a 0% APR credit card.  Obviously, the better your credit score, the better your rate will be after the introductory period.

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