Be carful with your balance transfer cards. They may be looming peril far worse than what you are seeing now, particularly since they have jacked up your current account interest rate. While the credit card balance you transferred may incur 0% interest for a period, most banks charge an initial fee for doing the transfer. In most cases, that fee is 3% of the amount of each balance transfer. Look at that initial fee as compared with the interest you would have paid over the next year, and it is not really 0%. A 19% regular APR is 19/12, or 1.6% a month. So for your first couple of months, you are already in the hole.No, they wont change the low BT interest rate, but that is not what they are counting on.
The banks hope that you charge new purchases on your card after you’ve done the 0% balance transfer. The reason they want you to make new purchases on the card is so they can charge their standard 18.9%, or whatever, interest on those purchases. The payments you make every month go to pay down the monthly interst , then the 0% balance transfer first. You are not paying off the new charge balance, which is accruing the high interest rate. You can make no dent in those high interest balances unless you pay the full BT amount first. After the balance transfer amount is fully paid off, then you can pay off the new purchased stuff, which have been accumulating interest during the entire 0% promotional period. But they are betting that you wont.
If you don’t pay the BT amount, once the promtional period expires, it then accrues interest at the normal account interest rate. If they have jacked it up, you face accruing real debt. They are counting on this. Banks don’t offer free credit unless odds show it will make them more money in the end.The only way to make money on a 0% balance transfer deal is to pay absolutely no fees and not make a single charge on the card after the balance transfer is done.Message Edited by RobertEG on 11-09-2009 04:40 AM
Message Edited by RobertEG on 11-09-2009 04:49 AM
