Be a smart shopper of the 0% APR Balance Transfer Offers

Wouldn’t it be great to pay 0% APR (annual percentage rate) on all your credit card debt? Most of us get these offers in the mail weekly and they sound very tempting. So does sitting down and eating 15 dozen chocolate chip cookies, but just because something is tempting, doesn’t mean it is necessarily good for you or your pocket book.

Balance transfers are when you move the balance(s) from one credit card and put it on another. Sounds easy but there can be “catches” that could cost you a lot of money.

Read the fine print. If you are late, even one day on some of them, the interest rate on those may jump to almost 24% or more, plus they usually attach a healthy late payment fee. Some, although rare, may increase your rate if you are late on a totally different credit card or loan. Again, read the fine print before you sign or use the credit card!

One other item that appears in the fine print on many offers is a balance transfer fee – sometimes as high as 5%! You are actually paying some of the companies 3 or 5% to give them your loan balance. If you were to transfer $10,000, that could mean you are paying $500 in balance transfer fees! What happened to my 0% balance transfer offer?

Also, if you make additional charges on credit cards that offer the balance transfers, and then make purchases on that same card, you may lose much of the benefit of the zero percent rate. When you make the monthly payment, only a minimum amount goes toward the amount you just purchased, then the rest of the monthly payment goes towards the zero percent. Now, you have a smaller balance at 0%, and your purchases will be charged at 24%. The more purchases you make, the more of your outstanding balance will be at 24%. Not a good deal!

There is usually a lot of text on those credit card offers, but they are positioned so you read “You are pre-approved for $X,XXX, with no annual fee, and 0% on your balance transfers”, and miss the true story.