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Why you shouldn't wait on those zero percent credit cards

 
Published Jan. 19, 2015

If you're counting on a zero percent credit card to help you clear your debt, you better stop dragging your feet. Many of those credit card offers, which let consumers transfer balances interest free to a new account for a set period of time, come with a deadline that most consumers don't know about, according to a new report from CreditCards.com. The cards may also get harder to find in the second half of the year if the Federal Reserve acts to raise short-term interest rates.

Consumers may not realize that many credit card issuers limit how much time they have to transfer a balance over from a higher-interest card, according to CreditCards.com. Some issuers give consumers about 90 days after the account is opened, and others give them as little as 30 days, the report found.

"If for whatever reason you take too long to do the transfer, you can miss out on that opportunity," says Matt Schulz, senior industry analyst for CreditCards.com.

Zero percent card offers are a way for people to reduce interest rate charges, preferably while they pay down their debt loads. People who miss the time window to make the transfer could find themselves with a new credit card, which could tempt them to take on more debt, and with no relief from the high interest fees they might be paying on other accounts.

But the lower interest rate offers are far from free. Credit cards usually charge a one-time fee amounting to 3 percent of the balance. Some cards also charge annual fees. Applying for the credit card could also temporarily ding their credit score.

The cards work best for people who pay off their balances before the promotional rate expires, since often the rates that kick in after that can be fairly high, sometimes more than 20 percent, Schulz says. The average rate charged at the end of the promotional period was 12.86 percent. The highest was 26.99 percent. (The rate will vary based on a person's credit score.)

There was some good news for people with good credit: The zero percent offers that are still available are becoming a little more generous. The number of cards offering a promotional rate on balance transfers for at least 12 months grew to 33 percent in 2014 from 28 percent in 2013, Schulz says. The share of cards offering promotional rates for 15 months or more grew to 17 percent from 10 percent.

Another reason why consumers may not want to wait on these promotional offers: There could be fewer of them available later this year, says Greg McBride, chief financial analyst for Bankrate.com. That's because the Fed is expected to raise short-term interest rates, which could raise credit card rates overall.