When 0% Balance Transfer is a Good Option?

Last Update: September 11, 2021 Credit Cards

You’ve probably heard many confusing stories about why you should or should not consider a 0% bank transfer on credit cards. This guide will clear the air on the subject and teach you how to make the most out of this opportunity.

Here is What We will Cover in This Guide

  • What is a 0% balance transfer?
  • The Dos and Don’ts of a 0% balance transfer.
  • When is a 0% balance transfer not good for you?
  • The hidden dangers of a balance transfer.
  • How to do a balance transfer in a few steps.
  • Final verdict.

What is a 0% Balance Transfer?

Before we look at 0% balance transfer, we first need to understand what a balance transfer is.

Simply put, a balance transfer happens when you transfer debt from one credit card to another. The golden question here is why you would want to do that.

Suppose you have two credit cards, one with an APR of 18% and another with a two-year introductory APR of 2%. To save on interest, you can transfer the debt in the high-interest rate card to the zero interest rate card.

For the record, card providers offer an introductory APR to incentivize people to apply for the card. The promotion period is usually defined, mostly between 12 to 18 months but not below six months. The APR goes up after this period elapses.

A 0% balance transfer happens when you transfer credit card debt to an account with an introductory APR of 0%. To qualify for this debt management method, you must have a good to excellent credit score. If your credit score is not at par with the 0% balance transfer requirements, you may qualify for a slightly higher rate, let’s say 2%.

As we will see later in this post, this debt management method is not always as rosy as it seems.

The Dos and Don’ts of a 0% Balance Transfer?

A 0% balance transfer is right for you if you have a concrete payment plan within the set timeline. Otherwise, you would rather stay away from it or end up paying more than if you didn’t take it.

If you go for the 0% balance transfer, avoid making any transactions with high interest rates, cash advances, or purchases with regular APR until you have paid off the balance transfer. When you hold credit card debts with different APRs, your monthly payments are split between the balances.

Even worse, only the minimum payment is applied on the 0% balance transfer, with anything else above that going to the high-interest rate balance. The problem is that you might not know that your payments are not going to the 0% balance transfer until it is too late.

It is also crucial that you avoid losing your 0% balance transfer during the promotional period. These instances include making late payments, having a payment returned, or exceeding your credit limit during the offer period.

When any of these occur, you may be required to pay a higher regular balance transfer rate. Two late payments in a row can further attract a penalty rate, which will extend until you make at least six on-time payments in a row. Therefore, it is essential to determine the amount required to clear the debt within the promotional period and plan accordingly.

Keep tabs on your payments to ensure that they go to the right account and avoid incidents where you might be forced to take up debt with different terms. When looking for a 0% balance transfer account, ensure that you compare terms from different issuers.

When is a 0% Balance Transfer Not Good for You?

A 0% balance transfer may not be a good option if you are always struggling to make payments on your credit cards.

This form of debt management comes with stringent terms that can lead to aggressive penalties when violated. As a rule of thumb, always ensure a watertight payment plan for all the debt before taking the offer.

It may also not be prudent to make the 0% balance transfer if you clear your debt in few months. The balance transfer comes with a fee, mostly 3% of the debt, which can be higher than interest savings, especially when running a high balance. However, grab the opportunity if you are lucky to get a card that waives the balance transfer fee.

The 0% balance transfer may also not be a good option for you if you are not a disciplined spender. When you move debt to the 0% card, you may be tempted to take up another debt with the first card.

As mentioned earlier, the new high-interest loan takes the priority in monthly payments and may, therefore, prevent you from clearing the 0% loan within the given time frame. This will leave you in a worse-off debt position than before.

Again, if your FICO credit score falls below 720, then this form of debt management is out of reach for you. While you can be lucky to find an issuer who accepts a score below this, most won’t accept.

The Hidden Dangers of a Balance Transfer

It is always prudent to do a thorough evaluation before jumping in when it comes to balance transfer. The card issuers are for-profit businesses and wouldn’t offer such a deal if there wasn’t something in for them.

Here are some hidden dangers you need to watch out for when evaluating 0% balance transfer deals.

  • There may be hidden charges

Apart from the initial 0% balance transfer fee, there may be other hidden charges. A good example is the annual membership fee charged by some providers.

Ensure that you check the card’s terms and conditions thoroughly and read other consumers’ online reviews.

Remember that taking a 0% balance transfer is imprudent if the cumulative fees are more than the interest saved. However, there is no need to worry if you do your homework well.

  • Rewards can entice you to incur more charges

Some card issuers provide rewards. If the 0% balance transfer card has such a program, do not fall into the trap.

Most cards that offer introductory balance transfer rates and reward programs do not provide an introductory rate for new purchases. This means that you incur interest charges every time you make a purchase using the card.

The reward program will entice you to make purchases and, consequently, incur charges that will offset the interest saved through the 0% balance transfer offer.

  • Balance transfer fees may exceed interest savings

As previously mentioned, a balance transfer usually comes at a fee ranging from 3% to 5% of the transferred amount. Often, most issuers do not discuss these fees when advertising their offer.

It would be best to do your research well since these fees can significantly lower your balance transfer effectiveness. We recommend that you around since different providers have different fees, and you may be lucky to find a provider with no balance transfer fee.

Does Balance Transfer Affect Your Credit Score?

Another downside of a balance transfer is that it can adversely affect your credit score. Every time you open a new balance transfer account, your credit score is likely to decline slightly.

This is because the credit account’s age is also considered in calculating your credit rating. However, the drop should not bother you since you’ll recover from it quickly with timely payments.

Your credit score is also likely to suffer if you make an application for a balance transfer and is denied. Likewise, applying for multiple credit cards within a short period is likely to have a similar outcome on your credit score.

Closing old accounts immediately after making a balance transfer to a new card can harm your credit rating. Unless the account has an annual fee, you shouldn’t close it because it positively affects your credit score.

Failing to make monthly payments on time and clear the outstanding debt within the promotional period can negatively impact your credit score. Similarly, making multiple debt transfers by moving the debt you have failed to clear to another balance transfer card will have the same effect.

We cannot stress enough the importance of assessing your ability to make the required payments during the promotional period before applying for a balance transfer.

In a nutshell, the following steps will help you prevent a balance transfer from impacting your credit score negatively.

  • Don’t apply too often.
  • Don’t cancel your old cards if you don’t have to.
  • Review terms and conditions.
  • Avoid new purchases.
  • Pay on time.

How to Do a Balance Transfer in a Few Steps?

If this is the first time you are doing a balance transfer, the following steps will guide you through the process.

  • Check your current balance and interest rate

Before everything else, you must determine the amount due and the interest to be paid if you stick to the current plan. Remember that the aim of taking a balance transfer is to clear your debt as soon as possible while saving on interest payments.

  • Pick a balance transfer card that fits your needs

Once you have determined the amount due and APR, shop around for a balance transfer card with the lowest APR, preferably 0%, and fees. Consider yourself lucky to find a card that waives the balance transfer fees.

  • Read and understand the terms and conditions

Ensure that you read the terms and conditions carefully to avoid hidden charges.

  • Apply for the card

Once you have identified the card that meets your needs, you can go ahead and apply for it. Avoid applying for multiple cards at the same time.

  • Contact the card provider to do the balance transfer

You can do this online or over the phone. You’ll need to tell the balance transfer card issuer your old card account number and tell them the amount you want to transfer.

Typically, a balance transfer takes between seven and ten days to process. Do not stop making payments on your old card until you receive a confirmation that the transfer has gone through.

  • Payoff your debt

Once the transfer is approved, it is time to pay the debt as agreed in the terms. Remember that failure to adhere to promotion terms can result in hefty fines and negatively affect your credit score.


While a balance transfer may save you hundreds or even thousands of dollars in interest payments, it may also turn out to be costly when not planned well.

Before making a balance transfer, always ensure that you read the accompanying terms and assess your ability to adhere to them.

Also, make sure that you have compared the interest to be saved with the issuer’s fees for the offer. If the fees exceed the interest savings, this is not a good deal.

It is also prudent to evaluate different balance transfer issuers before settling on one. While most charge balance transfer fees, you may be lucky to find one with no charges.