Many credit card balance transfers give you the option to lock-in a low APR for the life of the balance.
However, you probably won’t find a balance transfer that offers 0% APR for the life of the balance. At least not now that the “scam” is over.
After all, it wouldn’t make a lot of financial sense for a credit card issuer to give you a lifetime loan at 0% APR. How would they make any money without doing something less than kosher somewhere along the way?
That said, there have been some 0% APR life of the balance transfer offers here and there, but they tend to come with certain requirements, like X number of purchase transactions per month and so forth.
Let’s look at a more realistic example of a balance transfer with a fixed APR for the life of the balance:
Current balance: $2,000
Current APR: 19.99%
Balance transfer offer: 3.99% APR for life of the balance
Balance transfer fee: $0
In our example, you’d be paying roughly $400 annually in finance charges at the current 19.99% interest rate.
If you elected to accept the balance transfer offer at 3.99% APR for the life of the balance, you’d be paying 3.99% on the $2,000 balance until it was paid off (about $80 descending annually as the balance falls).
Now you would have the choice to pay it off in six months or six years, but you’d enjoy that low fixed rate for the entire duration, regardless of how you choose to tackle the debt. This is the main advantage, especially for those with a large credit card balance that they know can’t be paid off in just 12 months.
So balance transfers that have a fixed APR for the life of the balance may be more attractive than 0% APR balance transfers, but you’ll have to do the math.
Let’s change up that example to see what makes more sense:
Current balance: $2,000
Current APR: 19.99%
Balance transfer offer: 0% APR for 12 months, 12.99% thereafter
Balance transfer fee: 5%
In this example, you’d immediately be hit with a $100 balance transfer fee, raising your balance to $2,100.
However, you wouldn’t accrue any interest for 12 months, and ideally could pay down the debt pretty quickly.
But even if you paid off the entire $2,100 within a year (during the promotional 0% APR period), it would still cost more than the $80 in finance charges you’d pay if you went with our life of the balance offer example.
And assuming you didn’t pay it off in full within 12 months, the remaining balance would be subject to the 12.99% APR, making it even more expensive than the life of the balance offer.
So in conclusion, the life of the balance offer could make more sense in our example. But you really have to set up a plan of attack to determine which will be the better deal for your particular situation.
Perhaps the best solution would be going with a no fee balance transfer offer first, and then shifting the remaining debt to a low fixed rate balance transfer after. This could be the most cost effective.
Tip: Make sure you create a plan to pay off the debt first, read the fine print, and shop around to ensure you get the best balance transfer deal.
