How Does a 0% Balance Transfer Work?

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A balance transfer is a credit card transaction where you move, or transfer, all or part of the balance of one card onto another credit card. Some credit card issuers offer special promotional interest rates on balance transfer to entice new customers.

The 0% APR balance transfer is the best of all balance transfer promotions because you will pay no interest on the balance transferred during the promotional period. You typically need to have good to excellent credit to qualify for 0% balance transfer credit cards. (If you don't qualify for a 0% interest rate, a low-interest rate – like 2.99% – is good too.)

With a 0% balance transfer, your interest rate on the balance transfer will be 0% for the entire promotional period. By law, promotional periods must be a minimum of six months, but many credit cards offer much longer promotional periods. That means you won't pay any finance charge on the balance transfer until the promotional rate expires, so long as you abide by the terms of the agreement. For example, if your balance transfer has a 0% interest rate for six months, you won’t pay interest on your balance transfer for six months.

Since there is no finance charge, all of your monthly payment goes toward reducing the balance (plus the balance transfer fee if you've been charged one). Once the 0% balance transfer ends, the regular balance transfer interest rate will go into effect on the unpaid portion of the balance transfer. You'll continue to be charged interest each month until the balance is paid off.

0% Balance Transfer Benefits

The best way to take advantage of a 0% balance transfer is to pay off the balance before the promotion ends. That way, you pay no interest on the balance. Divide the total amount you're transferring by the balance transfer period to figure out what you need to pay each month to completely pay off the balance before the promotional period ends.

Avoid making any transaction with a non-promotional interest rate, cash advances or purchases with a regular APR, until you've paid off the balance transfer. This includes purchases and especially cash advances. When you have balances with different interest rates, your monthly payment is split between the balances. Only the minimum payment will be applied to your 0% balance transfer and anything above the minimum payment will be applied to the balance with the higher interest rate. You may think you're paying off the balance transfer when you're actually paying off a different type of balance.

Don't Lose Your 0% Balance Transfer

You may forfeit your 0% balance transfer offer if you make a late payment, have a payment returned, or exceed your credit limit during the promotional period. If that happens you will trigger the higher regular balance transfer interest rate. With two late payments in a row, the credit card issuer can apply the penalty rate until you make six consecutive on-time payments.

Not to Be Confused With 0% Deferred Interest

Deferred interest financing is another type of interest promotion, but it's not the same as 0% balance transfer. With 0% deferred interest, you still get an interest-free period, but interest continues to accrue, or accumulate, during the promotional period. If you pay off the balance completely before the deferred interest period ends, then you don't have to pay any interest. However, if any of the balance remains unpaid when the deferred interest period ends, all the accrued interest is added to your balance, negating all the benefits of having deferred interest.

Zero percent balance transfers aren't set up this way. No interest accrues during the promotional period and if you don't completely repay the balance, you only begin paying monthly interest on the unpaid balance from that point forward.