Yes, I promise I’ll write about other stuff in a bit. But I just got e-mailed a link to another site which talks about credit card balance transfers:
The kind souls at Discover sent me a similar offer a few weeks ago: zero percent on any balance transfer, good for the next twelve months. The catch (which I almost missed):
You must make at least one purchase per month on the card for the promotional rate to stay in effect on any transferred balances.
The writer muses that there could be some ways to get around it, things like charging a pack of Bubble Gum monthly and pay negligible interest. But the thing is that it’s hidden in the fine print.
Obviously, it’s really hard and annoying to read the fine print on all your credit card offers and such. But the way the system is set up, you have little choice. If you’re going to use a credit card—whether for cash back, because you feel that credit is important to your lifestyle, for balance transfers and debt repayment, for arbitrage, anything—you have to read it.
It’s like any tool. You wouldn’t start using a chainsaw without using instructions. That’d make you liable to end up like the kid in Robert Frost’s disturbing poem “Out, Out.”
If you have a hard time following the fine print, consider using a highlighter on the important stuff. Or jot down some notes like “interest for purchases: x%, interest for balance transfer: y%, fee for balance transfer $20, etc.
Print Friendly
{ 2 trackbacks }
{ 5 comments }
I wonder if the fact that the CSRs hide this information qualifies as information crime. I recently spoke to a CSR who used words like “rates as low as” and “upto 12 months”. They usually wait for you to see through these phrases. But once they realize that you are informed about this, as in, if you continue probing further, they usually give you the right information. Of course, getting this information out of a sheet of paper tends to be more difficult, but is much more readily available. I usually follow the taking notes tip.
Watch out. Another part of the fine print will obviously say “balances with lower interest rates will be paid before higher interest rates”. What’s happening is that the lower rate is being nibbled away, but it’s being surrounded by a layer of higher interest debt that you can’t get to until all the low-interest debt is gone.
If you’re not careful, you end up with no savings at all.
It’s amazing what these companies will come up with. And it’s so true that you have to read everything they send you.
I’m more and more amazed at what a great deal I got on my balance transfer the more I read about things like this. I have a 4.97% interest rate, for the life of the debt. There was no charge to do the transfer, and I don’t have to make any purchases or anything else like that. The only thing that changed really was that my monthly minimum jumped from about 2% to 4%, which is fine by me, because it forces me to pay it off quicker! (and I’ve had this going for more than a year now, so I assume that if there were any fine print I hadn’t noticed, it would have bitten me in the ass by now).
I guess the main problem is that so many people do operate chainsaws and more dangerous financial tools without even considering that the instructions could very well warn them not to use the tools in the first place. I haven’t used credit in a long while now, and I find that I’m happier spending money on savings, rather than minimum payments, every month.
Regardless of that balance transfer scam, there’s really no good way to save money by spending more of it every month. Pulling out a credit card even once a month in order to keep a low rate on other debt is just an invitation to use the card to finance other unnecessary purchases.
Comments on this entry are closed.