The myth of 0% credit card balance transfers

Discussion in 'After Hours Lounge (Off Topic)' started by Brian Perry, Jul 21, 2003.

  1. Brian Perry

    Brian Perry Cinematographer

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    Most of you have probably received multiple offers in the mail from your credit card provider(s) to transfer a balance from other another account. Usually, the offer will be for 0% for 6 months, sometimes even with no transaction fee. Before jumping at these "deals," you should know there's a catch. (Isn't there always?)

    To preface, I always pay my balance in full each month, so I normally throw these invitations away. However, when I received the latest offer for 0% interest until Feb/04, I decided to transfer a $6,000 carpeting bill I had just received. I figured, what the heck, it's free money--I'll invest the $6,000 and pay it all off at once in Feb/04.

    When it came time to pay my credit card bill, I was curious how the bank would keep my new charges ($4,000 this month) separate from the $6,000 balance transfer. In other words, I wanted to pay all $4,000 of current purchases and leave the $6,000 balance alone. I was surprised to learn that it is impossible to do so. The bank applies any payments to the lowest APR balance first. Thus, my payment of $4,000 would go toward the $6,000 balance transfer, and I would immediately begin incurring finance charges on the remaining balance (0% for the $2,000 left on the balance transfer but 13% on the $4,000 in new charges).

    After speaking to two customer service reps, I learned that this practice is the norm amongst credit card companies. They basically admitted that the only way you can achieve the 0% deal for 6 months is if you transfer the balance and then not use your card at all for the next six months, which kind of goes contrary to the point of having a credit card. If you continue to make substantial charges on the card, which I did, you are essentially negating the deal in the first month or two.

    So, if you want to take advantage of one of these offers, my advice is to use the balance transfer by itself and use a different credit card for new purchases. Otherwise, the bank will force you to pay the entire balance off immediately (including the balance transfer that was hyped as a 6-month freebie) to avoid finance charges. While I'm sure this is all listed in the fine print, I think it's a deceptive practice.
     
  2. Malcolm R

    Malcolm R Executive Producer

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    Yep, that's why you need to read ALL the fine print enclosed with such offers. I have a very similar offer that I want to use, but I have to wait until I get the current balance on the card paid off at the higher rate so I can then transfer a balance and successfully use the lower rate. Otherwise your payments get applied to the lower rate balance first and that higher rate balance (in my case $600) keeps ringing up finance charges at the higher rate until the lower rate balance is completely gone.

    This does seem to be standard procedure, as I've seen it in many offers. If you're going to successfully take advantage of it, you really need to have another CC you can use for purchases while the lower rate balance is being paid off.
     
  3. Jeff Ulmer

    Jeff Ulmer Producer

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    Yes, that is standard. These cards are a great way to finance single transfers, but nothing else.
     
  4. Steve>Smoker

    Steve>Smoker Extra

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    Finance companies RELY on people not being financially wise to make their money.

    Perfect example :

    The 'Buy Now Pay Later' scheme.

    Anyone who is clever, buys the product and puts the money away each month to enable them to pay off the debt on time gains out of the deal.
    They get to use the product while they save up to pay for it!
    Great .. unless your not disciplined enough to do that.

    Try going past the 'payment due' date and see what happens!

    This is how they make their money - you already have the product, been using it for months and when you signed up the small print says if you dont pay it off on XX day then you incure nasty charges PLUS a hideous interest rate.

    Although it isnt 'fair' its business.
    Its legal and it obviously makes someone rich preying on folks who are careless with their money management.

    All I can say is read the small print, use the good parts of the financing deals and avoid the bad.

    Most of all,

    IF YOU CANT AFFORD IT DONT BUY IT!!!!!!!!
     
  5. Don Black

    Don Black Screenwriter

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    I agree that this is standard practice. I literally paid off just yesterday a $10K balance I had riding for 8 months on Discover Card's 0% APR offer. For those 8 months, I locked my Discover Card in my safe and triple checked that I had a $0 balance before I made the transfer. Shady tricks but worth it for the free loan.
     
  6. Francois Caron

    Francois Caron Cinematographer

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  7. Keith Mickunas

    Keith Mickunas Cinematographer

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  8. Reginald Trent

    Reginald Trent Screenwriter

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    That's why you get a 0% card from a different financial institution, that way you can pay them the minimum and use the rest as you please.
     
  9. Jason_H

    Jason_H Second Unit

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  10. David Preston

    David Preston Supporting Actor

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    When ever I get a balance transfer thing in the mail it goes straight to the shreder. You can't even call the CC company to ask them a question without them asking if they can transfer any balances for you.
     
  11. Reginald Trent

    Reginald Trent Screenwriter

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    0% transfers can be a great resource if you know what you're doing. Ignorance with this like most anything can hurt you.

    Bottom line know what you're getting into.
     

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