How does a 0% balance transfer work?

Introduction

You cannot pay off one credit card using another credit card, but you can transfer the balance to another credit card using a balance transfer. Some credit card companies offer special promotional interest rates on balance transfers to attract new customers.

Benefits of 0% Balance Transfers

You can maximize the benefit of a 0% balance transfer by paying off the balance in full before the promotional period ends. This allows you to avoid interest on the balance and save hundreds of dollars. You can calculate the amount needed to pay off the balance transfer by dividing the total transfer amount by the number of months or billing cycles in the promotional period. You should avoid making any transaction with a non-promotional interest rate, such as cash advances or purchases at the regular interest rate, until you pay off the balance transfer. When you have balances with different interest rates, the monthly payment is divided among the balances. The minimum payment will only be applied to the 0% balance transfer, and any amount above the minimum will go towards the balance with the highest interest rate. You might think you’re paying off the balance transfer when you’re actually paying down a different type of balance.

Not Losing 0% Balance Transfer

You can lose the promotional interest rate if you make a late payment, if the payment is returned, or if you exceed your credit limit during the promotional period. Losing the promotional interest rate will result in triggering the regular interest rate or even a penalty rate if your payment is late by more than 60 days.

Not to Confuse with Deferred Interest at 0%

Deferred interest financing is another type of interest promotion, but it is not the same as a 0% balance transfer. With deferred interest at 0%, you still get a period without interest, but interest continues to accrue during the promotional period. If you pay off the balance in full before the end of the deferred interest period, you won’t have to pay any interest. However, if any part of the balance remains unpaid when the deferred interest period ends, all accrued interest will be added to your balance, nullifying any benefits of the deferred interest.

0% balance transfers do not work this way. No interest accumulates during the promotional period, and if you do not pay off the balance in full, you will only start paying monthly interest on the unpaid balance from that point forward.

Source: https://www.thebalancemoney.com/how-does-a-0percent-balance-transfer-work-961094