Dallas Auditor .com

Credit card companies compete vigorously against each other. They always strive to better their market position. One common strategy is for a credit card firm to expand its customer base by encouraging new customers to join it and transfer their existing debt accumulated in the past on a competitor credit card. The benefit offered to the customer is zero interest cost on that outstanding debt balance.

The zero interest rate is offered for only a relatively short period, typically six to twelve months. The interest rate is then raised to the rate prevailing at that future time. Nevertheless, even though it is only for a limited number of months, a zero percent interest rate is, for many customers, an offer too attractive to knock back. So a significant amount of customer churn is generated by these offers.

Six months or more can be sufficient time for a customer to accumulate enough surplus cash flow to pay off the outstanding balance without incurring any further interest cost. Even if the offer is for only six months, a customer with a debt balance of, say, $5,000 paying an interest rate of 20 percent per annum on credit card debt, the savings accrued by the customer will be more than $500.

The process of transferring a credit card balance from an old card to a new card can be surprisingly stress-free. The quickest and easiest way is to do it online when you apply for your new zero percent card. Applying for the debt balance transfer at that time will maximize the time during which you can benefit from a zero interest rate. The zero interest rate period usually starts from the date the credit card is approved by the credit card company, not from when you apply from the debt balance to be transferred.

Once your new zero percent credit card and debt balance transfer is approved, no further action is required by you in regard to the transfer; all the necessary arrangements are completed by the new credit card company. It contacts your former credit card company and pays off your outstanding debt balance. The net result is that you then owe the new credit company that same amount.

The amount of the outstanding debt balance approved for transfer will depend on a range of factors including your new approved credit limit. It is not unusual for all of the outstanding debt balance to be approved for transfer.

When switching into a credit card with a zero rate, all amounts paid into that account are in the first deployed towards repayment of the zero rate debt. Until that debt is all repaid, the purchase interest rate will be applied to all purchases made with the card. It is therefore clearly important that the customer remain informed about the level of that rate since its cost can substantially offset the net benefit of switching into the new card.

Finally, debt transferred to the new credit card can begin to be reported as debt by the that card before it is cleared away as a debt by the old credit card. This situation may occur for the same reasons that allow the banking system to apply an account debit as soon as funds are withdrawn but delay applying a corresponding credit until after transaction checks and confirmations are finalised some days later.

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