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How to Save Money with a 0% Balance Transfer

Editorial Note: This content is not provided by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by the issuer.

Advertiser Disclosure: The card offers that appear on this site are from companies from which SmartAsset.com receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). SmartAsset.com does not include all card companies or all card offers available in the marketplace.

Every month, our credit card expert surveys leading offers & compiles a list of the best credit products on the market. His goal is to locate deals that offer huge potential rewards or exceptional interest rate savings.

Is credit card debt hanging over your head? You may be able to save money by transferring the balance on one card to a new card with a lower interest rate. If you’re lucky, that new, lower interest rate could be 0%. Let’s take a look at how you can save money with a 0% balance transfer. 

Find the best balance transfer credit cards here

How Balance Transfers Work

With a balance transfer, your new credit card takes on your credit card debt from an old credit card. Once you execute a balance transfer, your old debt is subject to the APR of your new credit card. Your credit card may also charge you fees for the balance transfer.

Some cards, like the BankAmericard® Credit Card, come with an introductory 0% APR to attract customers who want to execute a balance transfer. The regular purchase APR on the BankAmericard® Credit Card is a variable 13.49% – 23.49%. That may sound steep. But remember for your first 15 billing cycles, you’ll pay a 0% APR on new purchases and any balances you transfer from an old card. The card charges a balance transfer fee of $0 as long as you transfer your balance in the first 60 days of account opening. After that, the fee for future balance transfers is 3% (min. $10).

Related Article: Best Balance Transfer Cards

Balance Transfer Risks and Rewards

How to Save Money with a 0% Balance Transfer
If a balance transfer with a 0% APR sounds too good be true, keep in mind that there are risks to balance transfers. If you don’t pay off your debt by the end of the 15-billing cycle with 0% APR that the BankAmericard® offers, your debt will be bumped up to a variable APR between 13.49% and 23.49%. But even if you miss the 15-billing cycle cut-off you could still save money.

Let’s take a look at some balance transfer scenarios. Say you have $3,000 in credit card debt that you want to transfer. You’re currently paying a 16.41% APR, which is the national average. You transfer that debt to the BankAmericard®, paying no balance transfer fee. Assume your effective APR on your new card after the introductory period will be 18.24%, the average of the card’s APR range.

Effectively, your starting balance is $3,000. You could get out of debt in 12 months by making on-time monthly payments of $250. And you would save $273.24 in interest, compared to your old card with the 16.41% APR. You’re debt free!

But even if you take more than a year to pay off your debt you could still save money. If it takes you 15 months to pay your debt down, you would make monthly payments of $200 and still save $338.55 in interest compared to what you would have paid if you hadn’t switched cards.

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Bottom Line

How to Save Money with a 0% Balance Transfer

A balance transfer to an introductory 0% APR card can be a great way to knock out debt while saving on interest. If you’re in the market for a new credit card and you have old debt in your life, a balance transfer could be a smart move. Remember, though, that not all cards offer a 0% balance transfer APR. And some balance transfer cards charge balance transfer fees that can be quite steep. Before you commit, make sure you’re getting a good deal.

Photo credit: ©iStock.com/pixdeluxe, ©iStock.com/rogerashford, ©iStock.com/BrianAJackson

Editorial Note: This content is not provided by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by the issuer.

Advertiser Disclosure: The card offers that appear on this site are from companies from which SmartAsset.com receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). SmartAsset.com does not include all card companies or all card offers available in the marketplace.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.

Amelia Josephson Amelia Josephson is a writer passionate about covering financial literacy topics. Her areas of expertise include retirement and home buying. Amelia's work has appeared across the web, including on AOL, CBS News and The Simple Dollar. She holds degrees from Columbia and Oxford. Originally from Alaska, Amelia now calls Brooklyn home.
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