Credit card companies are at it again. Maybe it’s been happening all along and I just didn’t notice it. That might actually be the point. Opening a letter I received from a major credit card company I was disgusted at what I read. I have no problem taking advantage of a 0% interest offer if diligent payments are made to ensure NO interest is paid. But what I saw exposed credit card companies for what I know they are, financial predators.
What I received was a balance transfer offer letter. It suggested that it would be a great idea to consolidate debt by transferring the balance of my high interest credit cards to their card. I could save on interest and have the convenience of a single payment. It sounded wonderful. The letter made it sound like they were my friends, looking out for consumers by offering help. Included in the letter were even balance transfer checks for my convenience! Then I saw the interest rate and just about spit out my drink from laughing.
The interest rate on any balance transfer would be the same as my purchases, which is over 13%.
This isn’t a deal. The credit card company doesn’t care about me. They are not my friend. They are not trying to help me.
What’s Wrong With This Offer?
There are many disadvantages to utilizing this effort, but here are the top two:
- High Interest : 13% is NOT a low interest rate. Sure, it may be lower than the 29.99% you get jacked up to on some credit cards when you miss a payment but it’s no bargain. If you need to consolidate debt, you can do better than this.
- Open Ended Payments : The minimum monthly payment to a credit card is calculated by a percentage. Every time you make a payment, the monthly payment goes down just a little. This results in payment in full taking years and years if you only make the minimum payment. You cannot just point at a date on a calendar as the finish line to being paid in full.
A Bank Is A Better Option
If you really want to consolidate debt, a better option is to visit your friendly neighborhood bank. Let’s compare what a debt consolidation loan from a bank would look like:
- Lower Interest : I called my bank this morning, and the interest rate for a personal loan about 7%, or just under HALF of the great balance transfer deal sent to me by a credit card company.
- Finite Term : With a personal loan from a bank, the term is set in stone. You know exactly when the last payment will be made, and how much you’ll pay in interest.
Make no mistake about it, the credit card company’s offer was just short of a full blown scam. They have the advantage of being able to infiltrate your home. It would be easy to do the balance transfer from the comfort of your kitchen table using a laptop keyboard. There’s no application to fill out, nor do you have to explain your situation to a banker. But make no mistake, it not the right choice.
How about you, EOD Nation, have you noticed a rise in balance transfer offers lately with high interest rates?
Thanks for the warning. The other part of balance transfers that people overlook is the fee. While there are a handul of cards that have limited time “fee free” transfers, most charge at least 3% for the privilege of transferring your debt to them. This makes many deals just not worth it.
The other thing to be wary of is that the new credit card company will give you a limited time to use the new lower rate. After that time period is up, the rate will shoot up. So make absolutely certain that you will be able ot pay off the loan in the promotional period.