Credit Card News: Your Money

Cards with 0% APR balance transfer options are coming out for longer and longer periods of time.

Before the recession, interest-free balance transfer offers were so common that customers took for granted that there would always be one in the mailbox. If a person had decent credit and wanted to pay off a balance fast, opening up a new line of credit with a 0% interest introductory period was the easy answer.

After the financial crisis, these offers were harder to come by. Banks began getting pickier about whom they extended credit to at all, never mind 0% APR offers. Many consumers buckled down and tried to pay off their credit cards at the existing rates, while others gave up and declared bankruptcy.

But those 0% APR offers are once again becoming common, and for longer and longer periods of time—up to 24 months interest free. This is good news for many, especially people struggling to pay off large debts. However, experts warn that customers should be careful about accepting such offers. They advise people to do the math first and make sure the offer will really save them money in the long run.

The problem is two-fold, say finance experts. First, these offers usually come with fees—typically 3% of the total balance transferred. For someone transferring a hefty $10,000 balance, that comes to $300 in fees. Second, the interest rates can be higher than the original card’s rate, once the promotional period ends. If customers don’t realize those things, they may not be getting the deal they think they are.

The key is to know how much interest one is currently paying and figure out whether doing the balance transfer will pay off in the long run. If people can pay off the entire balance before the promotional period ends, the transfer is often worthwhile. They must also factor in the balance transfer fee—unless they can find an offer with no fee.

Those, too, may be coming back. There are currently a few offers out there for no-fee 0% APR balance transfers, which had virtually disappeared during the recession. Another option is low-APR balance transfers, which are more likely to have a no-fee offer.

Either way, it’s clear that things are looking up for people wanting to transfer high-interest credit card debt.