March 3, 2009
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When to Consolidate, Pt.3
Care & feeding of promo CC.If you decide to go the route of a balance transfer to a credit card with a lower APR (preferably 0% promo), here are some things you might want to know:
Time will run out: In two ways, actually. First, these credit card promo offers generally expire soon after you learn about them. Secondly, the promo will almost always expire within a year -- sometimes within six months. In the meantime, however, many also offer rewards points. With a large balance on a credit card, they can add up quickly. Sometimes, they will actually add cash to your account (pay on the balance). Take advantage of this if you can. Whatever you do, however, pay attention to the promo's expiration date and know what your new APR will be after that time. Pay down as much as you can before that happens as, after that you'll be paying finance charges on all amounts remaining.
New purchase/Cash advance ‘gotcha': Until the new federal credit card regs take effect, expect to only be told about the 0% APR for balance transfers. You won't be told that that any other type of charge will have a high APR and that you will not be able to pay down the higher APRs until you've completely paid off the lower APR accounts first (which means the entire balance transfer). Until then, you will always be charged the higher APR every month for any purchases or cash advances on that credit card.
Meanwhile, you should expect to be inundated with tempting offers to use the ‘free checks' they send you in the mail every single week. Easy cash until you try and pay them off and learn the credit card lender won't let you pay a dime on them until you've satisfied every dime toward the balance transfer. You may get lucky, like me, and get all three free but, don't assume it. Make double-sure. Never place any charges on the card that have a higher APR than the balance transfer. Get another card for doing that.