Yet another client came in bamboozled by their credit situation. Recently, they used a handful of checks they got from various credit card companies to transfer their balances to cards where they will have 0% interest for a full year, 18 months, or whatever.
In fact, by parlaying around a few different cards they got their entire amount of credit card debt onto 0% payment plans. Smart?
Well, maybe. You see, 99.9% of those 0% balance transfer checks come with a transaction fee. It isn’t anywhere prominent, so you have to look for it. Down there in the fine print you’ll see the line, “Checks are subject to a 3% transaction fee or $25 whichever is higher.”
That means that if you took a $6,000 balance, an $8,000 balance, and a $5,000 balance and switched them around to get 0% on all of them, you paid $570 in transaction fees. Now, if you are having some issues and you intend to take advantage of the year of 0% interest to make some smart moves in your finances, this just might work out in the long run. A lot of that math depends on your interest rate. If you got good cards in the first place, your rate of 9.9% or 12.1% won’t make this add up in your favor as fast.
However, the biggest catch is the other fine print down at the bottom. It says that all of your payments will go to the lowest rate balance first. In other words, if you put $5,000 on the card at 0% interest, and then you charge $300 you will owe interest on the $300. If you send in $300, it won’t help because, the $300 payment will be credited to your lowest interest balance which is the 0% part. So, after your payment you have $4,700 at 0% and $300 at 13% (or whatever). Now, the worst part is that you will pay 13% on that $300 until you have paid off every penny of the 0% balance. That is NOT a good deal.
How to Use 0% Interest Offers
If you are going to use a 0% interest offer, you must NOT USE that credit card again until your balance transfer is paid off. In other words, you need another card that will be your regular card that you make charges on and pay off each month. Otherwise, you will just get killed in the end. Why do you think credit card companies are always making these offers? Do you actually think that they would do something that loses them money like giving you money interest free for 12 months or longer?
You can still win, but you must be smart. Use your 0% offer and then put that card away in your lock box until it is completely paid off. Otherwise, you are just throwing money down the toilet and feeling good while you do it.
Tags: Credit Cards, debt, interest, payments, zero percent
The stock market dipped below the magic 20 percent needed to call it a bear market yesterday. Media outlets were quick to throw up their bear market headlines, but the markets rallied and exposed the headline game as a gimmick with flashy words.
Some of you have followed along as we try and sell our house without a real estate agent. I have documented how we were using Iggyshouse.com to this. But, the site has been down for the last several days. I was finally able to find this article suggesting that this is not a temporary glitch. [...]
Don’t waste your money on services that allow you to constantly get your credit score. Use a little insder knowledge to get a free credit score and check it only when it makes sense.
These days, medical expenses are a big burden to many family’s budgets. Unfortunately, it isn’t always easy to figure out just how and when you can save money without endangering your health. However, here are some tips that could save you plenty of money on your prescriptions. Costco, Sam’s Club, and Other Warehouse Clubs It [...]
Use the new Credit Card Lab on Capital One’s website to make a great rewards card, or to compare other rewards cards.
The U.S. Supreme Court in a 7-2 decision upheld the central tenant of most state’s municipal bond [tag]tax[/tag] policy, specifically that a state can exempt it’s own muni bonds from taxes while taxing the interest on other state’s [tag]muni bonds[/tag]. So, nothing changes from before. If you live in California, the only way to avoid [...]