In our last article on Balance Transfer Catch 22’s, we discussed balance transfer checks. This article covers a similar credit card trick: different introductory periods. For example, some credit card companies will offer consumers a 0% APR on balance transfers for 1 year and a 0% APR on purchases for 6 months. In the fine print, the same trick that applies to balance transfer checks comes into play.
The trick behind this deal is that all payments you make are applied to the balance with the lowest interest rate. Thus, when your 0% purchase APR jumps to the standard APR after the 6 month 0% period expires, any payment you make will reduce the portion of your balance that is still being charged a 0% APR. Consequently, if you have a $2000 balance transfer with a 0% APR and $2000 in purchases being charged a 12% interest rate, the first $2000 you pay your credit card company will reduce the balance with the 0% interest rate while you accrue interest on the other $2000 of your credit card debt.
This trick can easily go undetected, as a person would have to closely inspect their credit card statement to catch on to this practice.
Fortunately, if you haven’t already been victimized by this practice, it is easy to avoid. When you apply for a 0% APR balance transfer knowing you will be making new purchases, find a card that offers a 0% rate on both purchases and balance transfers for a full year. If, however, you have already been trapped by a credit card with two different introductory periods, stop using your credit card for new purchases and consider getting a new, 0% credit card.
