What Credit Card Companies Keep Secret About Credit Card Balance Transfers
So, you want to do a balance transfer because your interest rates are too high - What should you know?
Well, first, most people don't know that interest rates on credit cards are unusually high as it is. Things are unlike the good old days when interest rates were pretty good for those with good credit. Today, it is another story. Credit card balances have an average interest rate of 20% to 24% (all record highs). Unfortunately, unless interest rates were going to start falling, which is highly unlikely, interest rates on credit cards could be up much higher before you know it. This is the point that credit card companies invite you to move your money over and take advantage of 0% financing for a certain period of time.
From a consumer standpoint, it seems like a no-brainer. Who wouldn't want 0% interest for a period of time? Unfortunately, it isn't about the interest rate after the 0% time period that makes these moves so dangerous. It comes down to the ultimate interest rate you get on the balance transfer. Here is a look at the fine print from Citibank:
Your interest rate following the balance transfer and 0% period will be "21.24% to 29.99%, based on your creditworthiness."
You could have great credit, and your credit rate after the 0% offer would still be 21.24%! Let me say another way:
We (the credit card company) draw you into moving your money to a 0% interest rate time period on your credit card. We charge you 5% on the balance transfer, so we aren't doing anything for free. Then, based on our opinion of your creditworthiness, we choose your account's credit card interest rate. We don't disclose any information regarding the process of selecting rates. We do what we think is a fit for your credit experience.
The best rate you can get is 21.24%. The worst is 29.99%.
Chances are, you will be better off staying right where you are with your current interest rate. Always remember, credit card companies are not out to do you any favors!
Visit the Prudent Money "About" page to learn about Prudent Money. Schedule a consultation today by emailing firstname.lastname@example.org or calling our office at 972-386-0384 X 206