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by BuckyF on October 28th, 2003

BuckyF

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What's the catch with those "2.9%" credit card balance transfer offers?

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  • by BuckyF on October 28th, 2003

    BuckyF

    When considering doing a balance transfer, watch for a couple of things:

    1. The transfer fee - most balance transfers charge a transfer fee which is often 3% of the transfer amount or some maximum amount. If the new interest rate is much lower than your old one, this 3% is probably worth paying because of the finance charges you'll avoid with the lower interest rate. Sometimes, if you request your balance transfer over the phone, the credit card company may even waive this fee. Don't be afraid to ask, especially if the transfer amount is large.

    2. The term - most of these offers expire after a few months, at which point the interest rate on any remaining balance will return to the standard rate of the card. Keep an eye out for transfer offers that last for the life of the balance.

    From the credit card companies' perspective, the real point of these offers is to get you to borrow from them. They figure you probably won't pay off the entire balance at the low interest rate and that they'll make money on you after the low interest rate expires.

    They also figure that it's a good way to get you to sign up for their card, at which point they get to share your name and personal information with all of their partner companies who will subsequently try to sell you things.

    So, rest assured, the credit card companies are making their money, one way or another.

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