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 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.

Credit card firms seem to believe this type of deal does win new customers. Zero interest offers are extended frequently and by many different firms in the industry. Cardholders are attracted because these offers allow them to reap hundreds of dollars in interest savings.

For the customer, the actual mechanics of transferring a credit card balance from an old credit card to a new credit card are quite simple. Many customers choose to request the debt balance transfer online when they apply for the new zero percent credit card. Applying for the transfer at that time maximizes the benefit for the customer since the zero interest period commonly begins when the credit card is approved, not from the date the debt transfer is completed.

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 credit card debt approved for transfer will depend on the new credit limit approved for the customer. Desirably, the new credit limit should be high enough to allow the full amount of the existing credit card debt to be transferred. The new credit limit is driven by the usual unsecured credit approval factors typically applying to credit approvals, particularly the cash flow and debt repayment capacity of the customer. In many cases, all of the old credit card debt owed by a customer is approved for transfer.

It might be worthwhile highlighting a point frequently overlooked by customers. All monies deposited into a zero rate card account are, in the first instance, used to repay the zero cost debt. Until that debt is paid back in full, the purchase interest rate defined for the new card will apply to all expenditures billed to the 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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