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I have made a balance transfer with 0% APR for 12 months and paid only the minimum for 12 months. I wasn't charged any interest and if I pay the balance in full before 12 months is over, I don't get charged any interest. This, I understand.

However, it states in the balance transfer offer that "interest starts on the day of transaction". Does the "interest" in that sentence belong to the promotional 0% APR or my regular 15% APR? In other words, if I don't pay the balance in full before 12 months is over, do I instantly get charged 15% interest for all previous 12 months? Or is the interest going to start after the 12 month promotional period is over?

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  • You need to provide a lot more detail about what your contract with respect to balance transfer says about minimum payments, how this affects any other transactions on the account (e.g. some credit card agreements say that interest is not charged on new purchases if the balance is paid off in full each month in timely fashion, but if you are carrying a balance, then interest is charged from the date of posting of the new charge. For balance transfers, I suspect you will be charged full interest from the day of transfer if you do not pay off in full before the end of the 12 month period.
    – Dilip Sarwate
    Mar 25, 2012 at 17:54
  • Thanks for your help. It's a Discover card. I didn't use the card to make any purchases. I only made a balance transfer and paid the minimums for 12 months. The contract says: "0.0% Promotional APR for 12 months. We will begin charging interest on balance transfers as of the later of the transaction date or the first day of the billing period in which he transfer posts to your account. After the promotional period ends, you will be charged the APR for purchases, currently 14.99%. ". So, if I don't pay in full before 12 months is over, I'll be charged 15% interest for a full year instantly?
    – iSeeker
    Mar 26, 2012 at 10:29

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Balance transfers at 0.0% Promotional APR for n months are lucrative for card companies in various ways. One Discover offer charges a transfer fee of the larger of $10 or 5% of the amount transferred, with 0.0% APR for 12 months. Thus, if you take this offer and pay off $1000 on your other card, your transfer balance at Discover will be $1050. Furthermore, as long as any part of this transfer balance is not paid off, any purchase made on the card bear interest from the day the charge is posted till the day it is paid off; there is no grace period of 25 days from the end of the billing cycle to pay off that month's bill in full with no interest being charged. For those used to paying off credit cards in full every month, this can come as a rude shock: to those who are used to carrying a balance, it is just part of how the world works. Your stratagem of not charging anything on the card at all is a good idea, but even here, note that if the minimum payment required is, say, 10% of the outstanding balance and that is exactly what you pay each month, you will still owe $296.55 at the end of 12 months, from which point on you will be charged 1.25% per month, same as for purchases. In short, paying off the balance in full by the end of the 12 month period is a better idea than carrying this forward.

You might also want to calculate what APR you actually paid if you paid 10% of the outstanding balance for 11 months and a lump sum for the rest at the end of the 12th (for a total of $1050) and compare that to the touted 0.0% rate.

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