You have seen them, everybody has. You open your credit card bill and there it is. A blank check with your name on it, for you to use in any way you want. Best of all, there is a low interest rate…0%… a limited time. Sometimes for as long as six months or more. It looks too good to be true. As is the case most times, when something looks to good to be true, it usually is.
Credit card companies routinely send these magic checks out to people with low balances or who limit credit card use. After all, a credit card that isn’t being used isn’t doing much for the bank’s bottom line. So they make these offers in the hope that their customer will transfer high-interest balances, take advantage of low interest for that vacation they have been passing by, or get more air miles just in case. While these are all valid reasons, this plan has some pitfalls that many or most people find themselves falling into. Here are some things to remember before you take advantage of these offers.
LOOK OUT FOR THE FEES
There is often a transaction fee for balance transfers, often as high as 3%. This term is hidden in the fine print. Be careful. That transfer of $3,000 at zero interest just cost you a cool ninety bucks.
CAN YOU PAY IT OFF IN TIME
The low monthly interest is a good idea if you can pay off the amount within the time limit of the offer. It’s a good idea to save on interest. But remember that after the six months, interest goes up to the regular interest rate. Ensure that the interest rate is not higher than the rate on your other cards.
DON’T BE LATE
If you are late with your payments –even for a day– the special rate reverts to your actual interest rate. Credit card companies that appreciate your business raise your interest rate to a default rate, typically over 29%, as a token of appreciation.
DON’T DOUBLE DOWN
Remember, if you pay to transfer a balance or use these checks to pay off another credit card, that card now has a zero or low ratio. While your intentions may be good, the temptation to use that card is excellent. Most people will use it. Cautiously at first. Just to buy gas. Maybe to go out to dinner a couple of times. Then they get an email about a great deal on a plasma TV, and before they know it, the six months have gone by, and both cards are at the maximum.
DON’T USE THEM
If you are not sure you will be able to make timely payments and control your other debt, the best thing to do is avoid the temptation to take advantage of these offers. If you fail to use the checks in the allotted time, don’t worry. You will get more in your following statement. Don’t use them if you don’t need them or if it doesn’t make sense to use them.
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