balance transfer credit card
balance transfercredit card
A credit card'sAPR is the Annual Percentage Rate of that card. Many cards now begin byoffering zero percent interest on either balance transfers, purchases orsometimes both. This initial no interest period can be used to either avoidpaying interest on existing loans, or it can be used to make money.
Credit cardcompanies typically charge interest on the entire outstanding balance from thedate of purchase if the total balance is not paid in full. A furthercomplication is that cash advances are often charged from the day they areobtained rather than the billing date, and often at a different rate ofinterest from purchases. Also repayments are often applied to all othertransactions before they are applied to cash advances.
Zero interestcredit on balance transfers can be used to avoid paying any of the interest onexisting loans such as outstanding balances on other credit cards bytransferring the balances to the new card. This means that repayments can beapplied to reducing the balance rather than paying any interest.
Another use of 0%APR cards is to make money by transferring the available funds to ahigh-interest bank account, so that the interest becomes profit when the cardis repaid before it starts charging any interest. This method can even beapplied to forms of profit making other than interest-paying bank accounts,such as business ventures, although this obviously carries significantly morerisk and should be done only with extreme caution. It is rumored that the firstbatch of computer hardware for Google was bought using credit cards, and moviessuch as Clerks have also been financed in this way.
A credit card'sAPR is one of the main factors in choosing a card, and can be a quick way ofcomparing a variety of card offers, but it's not the only factor in choosing acard, as there can be various fees, and the exact details of the agreement canvary. Also, some cards offer particular rewards, such as air miles or otherspecific ways one can benefit from using the card.
For more relevantinformation see our Blog Post Credit Cards APR.