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Transferring Existing Credit Card Debt

By Gordon FJ Cook

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.

A zero interest offer usually applies for only a brief period, usually less than twelve months. At the end of that offer period, the interest rate increases to the variable rate ruling at that time. From a customer perspective, even if the offer is for a limited time period, zero interest can be an offer too good to refuse.

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.

Another point to recognize is that the debt balance transferred to your new credit card may be reported as a debit balance on that card before it is reported as a zero balance by your old credit card. If it occurs at all this situation is likely to exist for a brief period, perhaps only a matter of days. It arises for the same reasons that allow the bank holding the originating (or paying) account to debit that account immediately while the bank holding the recipient account applies a credit to that account on a delayed basis, sometimes after several days.

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Article Citation
MLA Style Citation:
Cook, Gordon F. "Transferring Existing Credit Card Debt." Transferring Existing Credit Card Debt. 4 Jul. 2010. 26 Jun 2015 <>.

APA Style Citation:
Cook, G (2010, July 4). Transferring Existing Credit Card Debt. Retrieved June 26, 2015, from

Chicago Style Citation:
Cook, Gordon F. "Transferring Existing Credit Card Debt"

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