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5 questions to ask about 0% card offers

They're called '0% promotional balance transfers,' and they can save you money -- or they can drive you deeper into debt.

By Stacy Johnson Apr 3, 2012 1:32PM

This post comes from Jason Steele at partner site Money Talks News.

Money Talks News on MSN MoneyWhen you're mired in credit card debt, it's tough to make a dent in your balance when you're paying double-digit interest rates. And if you're still clinging to a good credit rating, you'll be tempted by the 0% balance-transfer offers that are flooding your mailbox.

Image: Man paying with credit card (© UpperCut Images/UpperCut Images/Getty Images)While zero is always a great interest rate, there has to be a catch, right? In fact, there are several. Before you sign up for a promotional balance-transfer offer, ask yourself these questions:

What's the balance-transfer fee? In almost every case, credit card issuers make you pay a balance-transfer fee before you can take advantage of their 0% promotional financing -- and they say as much in their terms, if you read them closely enough.

A report this month by Smart Balance Transfers says, "Average 0% credit card balance-transfer fees increased in March from a multiyear low of 2.95% back above the 3% mark." That's just the average. Some cards are now charging as much as 4% or 5%. I could find only one card not charging a fee. (Post continues below.)

What's the length of the 0% financing offer? The second most important aspect of the balance-transfer promotion is: How long can you enjoy the 0% interest rate? Fortunately, the average length of 0% balance transfers has been rising. According to Smart Balance Transfers, these offers now average 12 months. So if a card has less than a year of 0% promotional financing, you should look elsewhere.

How long do you have to make a qualifying transfer? Like the balance-transfer fee itself, the eligible period for making 0% balance transfers is hidden in the fine print of the terms and conditions. Some cards (like Slate from Chase) allow you to make transfers only within 30 days of opening an account. Others (like More from Discover) let you do so throughout the life of the 0% promotion. Don't forget to check this.

Is the 0% on just balance transfers, or are new purchases included? This is a critical detail that must be understood before you apply for any offer. Some 0% promotional offers apply just to balance transfers, just to new purchases or both. Having 0% financing on new purchases can save you a lot of money -- but not if it's an incentive to incur even more debt when you should be paying off your balance.

What is the standard APR? Sure, you can enjoy a 0% balance-transfer offer for quite a while, depending on the card you get. But the good times will eventually end. When the promotional financing expires, how high will your interest rate be? Unfortunately, it's not likely to be one of the lowest interest rate cards on the market.
At the very least, thinking about that higher interest rate should motivate you to pay off your entire balance before your 0% rate expires. Otherwise, your only alternative will be yet another balance transfer -- and you'll likely be paying another expensive balance-transfer fee.

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