Several credit card companies attract new customers through offering 0% balance transfers. A 0% balance transfer occurs when an individual transfers the balance of one of their credit cards to another credit card and is able to pay off the balance that is transferred at a 0% interest rate. But is it as simple as that, or will you end up incurring other charges?

Usually, a 0% balance transfer is free if you can pay off the balance within the specified 0% interest time period. After that time period ends, a different interest rate will take effect and be applied to the remaining balance. Prior to making a 0% balance transfer, it is important to make a plan to pay off the entire balance. In some cases, a higher interest rate will be applied to the balance if a payment is late or missed within the 0% period.

Some people make transfer after transfer, switching to another 0% balance plan just before a higher interest rate kicks in. In many cases, though, you'll be charged a transfer fee based on the amount of your balance. Even a 1% transfer fee, which is low, can be significant if your balance is high enough. Some banks will charge you an annual fee as well.

Many experts recommend that you transfer your balance to another credit card only if you are certain that you will be able to pay off the entire balance within the 0% period. It may be more cost-effective to find a card that will give you a low fixed interest rate for the life of that balance.