How Does a 0% Balance Transfer Work?

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You can't pay off one credit card with another credit card, but you can move a balance to another credit card with a balance transfer. 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 it means you won't pay any interest transferred amount until after the promotional period. Qualifying for a promotional balance transfer offer usually requires you to have good to excellent credit.

If you don't qualify for a 0% APR balance transfer credit card, a low-interest rate – like 2.99% – will still allow you to save money on interest during the promotional period.

With a 0% balance transfer, you'll enjoy a 0% interest rate on the balance transfer for the entire promotional period, which must be at least six months. Many credit cards offer much longer promotional periods, even up to 21 months.

During the promotional period, you won't pay any finance charge on the balance transfer, 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

You'll get the maximum benefit from a 0% balance transfer by paying off the entire balance before the promotional period ends. This lets you completely avoid interest on the balance, potentially saving hundreds of dollars.

You can figure out the payment needed to pay off your balance transfer by diving the total amount of the transfer by the number of months or billing cycles in the promotional period.

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. 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 can forfeit your promotional interest rate if you make a late payment, have a payment returned, or exceed your credit limit during the promotional period. Losing your promotional rate triggers the regular APR or even the penalty rate if your payment is late by 60 days or more.

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.