Credit Card Balance Transfer Pitfalls

Credit card companies are currently slowing down on the balance transfer offers due to the high rate of default and the current economy. I have used them in the past to save me a lot of money in interest over the years. I was a fan of the 0% offers but they have now all but dried up.

I find that a lot people see a great rate advertised in balance transfer offers but fail to read the fine print. They then become victim of the change in terms and get hit with high rates, fees, and possibly end up worse off than they started. I personally believe this deceptive practice by the credit card companies is at least partially part of why they are in this mess to begin with!

What to look out for in a balance transfer offer:

• Teaser rates: This was big with the 0% offers. It would be 0% for 12 months and then jump to a much higher rate. As high as 25%! Make sure you don't do the transfer if you cannot pay it off within the allotted time. I call this the "bait and switch" method.
  
• Balance transfer fees: Most of the companies charge for doing the transfer. I have seen as high as 5% of the balance. I personally will not pay more than 3% (for a 0% rate). You are best doing a transfer that has no transfer fee attached but these are rare these days.
• Convenience Checks: A lot of the direct mail offers give you checks (if you already have an account open). SOME of them are for the rate offer. Others are for cash advances which charge the highest interest rates. Be sure you use the correct checks!
• Protection Plans: If you are not careful you will get signed up for the "protection plans" which cover your payments if you lose your job or some other financial disaster occurs. They charge a lot of money and are best avoided. This is typically offered over the phone by customer service reps at the company. "No" is your best word of choice!

Balance transfers can be useful, money-saving tools if utilized properly. As long as you do your homework and avoid the above pitfalls you will be on the road to becoming debt free. As with any other credit card offer you have to be sure to read the terms and understand them. If in doubt go without.