Those balance transfer checks that continue to flood our mailboxes have been touched upon a number of times in our Catch-22 series, and a recent check that arrived in my mail inspired me to bring up this subject once again.
The offer I received offered a “low balance transfer APR” so I could “save time by consolidating bills” and “save money on high interest balances.” All of these features seem appealing. Why not save time and money? And then I looked at the terms.
First, the “low rate” was 3.99% for 15 months and there was a 3% balance transfer fee with the check. That would effectively put my first year interest rate at close to 7%. Sure, this would be less than the average credit card rate, but a lot higher than 0%.
The second catch was that these “time and money saving” balance transfer checks were promoted as ideal to use just like cash. For an astronomical fee! The balance transfer checks were also cash advance checks, which immediately were subject to a 24.99% interest rate. And a 3% fee. Even the mob would find these rates unfair.
While looking over this offer, I realized that the purveyors of balance transfer checks are looking to prey on basic human desires. Many people who receive these offers do stand to save money and time (unless, of course, they use the cash advance feature). The issue I have, however, is that these offers don’t provide consumers with the best offer, mainly the easiest. Filling out a mailing from your current company is much easier than seeking out a better deal and moving your business to another company.
Getting the best deal on a balance transfer takes a little time. However, the money that can be saved more than pays for it. If a consumer had opted to transfer $5,000 using the balance transfer check from the mail, they would have spent $548.19 on interest over the course of a year. If that same consumer had taken a few minutes online to find a better deal, they would have paid $0. Not too bad for twenty minutes of online searching.
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