December 8,2008
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Balance Transfers (101), Pt.3 –
– Watcha's and gotcha's.In getting a clear picture through the smoke and mirrors, here are some of the things to look for:
- If your credit card standing is not so stellar, you should expect to be hit with a transfer fee. A good deal would likely be about 3% or less. For those with a good credit card standing, you may be lucky enough to be offered a deal with no fee but, these are becoming rare and this offer is seriously worth considering.
- Especially beware of the ‘New purchases' gotcha. These are almost always the rule, though there are a few exceptions. This is where the 0% interest promotion only applies to the transfer, not purchases. Even the slightest charge for a new purchase on these credit cards can never be paid off until the entire transfer amount has been paid off. Finance charges will ever accrue on those purchases starting with a minimum amount, in case the charge is too little to be worth the bank's while. Be sure to investigate this if you plan to make new purchases on this credit card. Perhaps the safest way to find out is to call the phone number provided with the offer and speak with a company representative. The first person you reach may be a lower-level representative, so get that person's name and write it down along with the date and time (these calls are typically recorded but not by you). If any doubts remain, be sure and speak with a supervisor and write down their name as well. If the new purchases gotcha applies, this is still not bad. It simply means that this card should be used only for the transfer and never used for new purchases.
- Transfer limits are not a ‘gotcha' but are worth considering. With current tightening trends in the credit card industry, ‘limits' are fast-becoming an issue for both the industry and the consumers, themselves. There are two different types of limits to consider. On limit is the amount that is allowed to transfer and the other is the total limit of the credit card. Obviously, maxing out the card with a transfer would render it as a storage container for only that debt. Still a good deal. But, there may be a much lower limit allowed for the transfer. If the limit is much lower than the original debt, the interest savings may not be worth the added liability of having to make two monthly payments now, instead of only the original. The two payments will probably add up to more each month than just sticking with the original payment because that one won't go away anyway until it's paid off.