The 0% Balance Transfer Credit Card is the Holy Grail for every rate-tart, looking to move their debts around and avoid paying any interest.
And in general, if used wisely, these types of credit cards can be very beneficial. But as ever, where consumers look to make a saving, the credit card companies will be looking to make a profit.
One of the most sneaky tricks that they have come up with is to fix the order in which the overall balance on the card is paid back. This means that if you make any purchases, when you might think you’re paying off that purchase, your money is actually going to pay off the transferred balance, rather than the purchase. And so the purchase balance starts to accrue interest, which will probably be at a rate of about 15%, if not more.
What can be done about this? Well, you could avoid paying for items with your credit card if at all possible. You could also have two cards – one with a low interest rate on purchases, and the other your balance transfer card. As ever, it’s a good idea to check the small print when you apply for the 0% balance transfer card, to avoid getting into this situation in the first place.
And if you’re going to be a “rate-tart”, you’ll need to remember to keep an eye on all the latest credit card deals.
I agree, this is a subtle point that isn’t obvious when you read the balance transfer agreements. I have some posts about this on my blog under credit cards.
Another thing to watch out for: if you use too much of your credit line for this, you will lower your credit score and have less available credit should you need it in the near future. Even if you don’t need it right now, your situation could change quickly and you might find yourself needing credit. Having credit available is worth something.