Many credit card users dismiss 0% APR balance transfers since anything too good to be true probably is. But these are not too good to be true, and there are several reasons why:
1. Banks need new customers. Credit card issuers spend hundreds of dollars per customer on advertising, marketing, and sign up bonuses, so forgiving a few hundred dollars of interest is not too big of a loss to acquire valuable new account holders.
2. Promotional financing offers are only available to the most qualified applicants. These offers are not only a great way to attract new customers, they attract the best customers with the highest credit scores.
3. Merchant fees make money for banks. Every time a customer swipes a credit card, the merchant must pay a fee of 2-4%. These fees add up to big profits for the banks, even when cardholders pay no interest or annual fee.
4. Balance transfer fees outweigh the loss. Almost all promotional balance transfer offers feature a 3% balance transfer fee (Chase Slate is the exception with none). 3% is a considerable amount, and it is added to the balance immediately.
- Chase Slate® named 'Best Credit Card for Balance Transfers' two years in a row, MONEY® Magazine, October 2013, 2014.
- $0 introductory balance transfer fee for transfers made during the first 60 days. After that, the fee for future balance transfers is 3% of the amount transferred with a minimum of $5.
- 0% Introductory APR for 15 months on purchases and balance transfers. After the introductory period ends, a variable APR of 12.99%, 17.99%, or 22.99%.
- $0 Annual Fee
0% for 15 months*
0% for 15 months*
12.99%, 17.99%, or 22.99% Variable*
5. Promotional balance transfers have been around for a long time. If these offers were bad for consumers, or bad for banks, they would have disappeared long ago.
6. There is no harm in applying for a card with a promotional balance transfer offer. Getting a new credit card will not hurt your credit. In fact, it can even help your credit as being extended additional credit will give you a lower debt to credit ration for a given amount of debt.
7. There is simply too much money to be saved by not paying interest. Credit cards have high interest rates because they are unsecured debt. Saving 12-18 months of interest payments is a big deal.
8. Promotional balance transfers are for a limited time. After the promotional period expires, the standard interest rate applies, which is very profitable for most banks.
9. Most banks have promotional balance transfer offers. If these programs were not legit, then why would nearly every credit card issuer have at least one?
10. You still have to pay your debt. 0% is a great number, but you are merely transferring your balance to a new account. You still have to make minimum payments and you still have to pay off your debt.
By understanding how these offers make sense for both cardholders and banks, applicants can use knowledge to counter their skepticism.