I received an email from a visitor detailing a bad balance transfer situation that she wanted me to share with other visitors. The visitor received a mail offer from her current credit card company offering her a 0% APR on balance transfers for 1 year. When she received the offer, she had a $5000 balance with the company extending the 0% offer and a $3000 balance with another company. Hoping she could save some money and consolidate her payments, the visitor initiated the balance transfer. That’s where the problems began.
First, she was charged a $75 balance transfer fee. If you’ve been here before, you know I strongly recommend no fee balance transfer credit cards. However, the $75 in balance transfer fees was only the tip of the iceberg. When the visitor made payments to her consolidated credit card bill, she was surprised to find out that every dollar she paid reduced the portion of her debt being charged 0% interest, not the balance being charged 14%. Fortunately, she realized this nasty credit card trick after only a few statements.
After finding my site on Google, she applied for a no fee balance transfer card and sent me an email asking that I share her story with my visitors. I was more than happy to oblige as this highlights one of the nastiest little tricks in the credit card industry. Buried in the fine print of just about every credit card’s terms and conditions will be a statement such as this: every payment will be applied to the balance with the lowest interest rate. In a nutshell, this means that if you have a balance on your credit card and you are offered a 0% balance transfer deal, you’re best off putting it in the shredder and consolidating your credit balances on a new 0% APR credit card that charges no balance transfer fees.
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