Balance Transfer Tricks and Traps Can Sap Savings - credit cards - Brief Article

Kiplinger's Personal Finance Magazine, Nov, 1999 by Stephanie Gallagher

That 0% credit card offer in your mailbox may cost a lot more than you expect.

Credit card balance-transfer offers as low as 2.9%--or even 0%--are easy to come by: Just open your mailbox. But lately card issuers have laced their low-rate offers with potentially expensive traps-and to sidestep these, you need to delve into the fine print. The snares to avoid:

* The introductory period may be shorter than you think. The countdown on a teaser rate may start when the account is opened, not when the debt you're transferring arrives. That makes some offers potentially worthless, such as the 0% offer on Providian Financial's Aria card, good only for the account's first three months.

* High fees may negate a good rate. Many issuers charge a balance-transfer fee of 2% to 4%, disclosed only in the fine print, sometimes with no upper limit. Beware of other twists, too: On the Aria card, for example, you pay no balance-transfer fee if you keep the card for a full year, but you get hit with a 3% fee if you cancel sooner.

* One late payment and all bets are off. Miss a payment date--by even a day--and some issuers will hike your rate by ten percentage points or more. Some will raise your rate if you pay late on another card. Citibank's Platinum Select's rate, for instance, can soar to prime plus 12.9 (21.15% total) after a single late payment to Citibank or to another creditor.

* The introductory rate may apply only to balance transfers. Citibank, for instance, charges 3.9% for transfers, while new purchases ring up interest at 15.65%. Plus, payments are applied to the lower-rate balance first. So if you go for the low-rate transfer, use another card for current charges.

A RARE GOOD DEAL. It's possible to find a good balance-transfer offer even after accounting for all the fine print. American Express, for example, offers a platinum Optima card that charges 3.9% on transfers (depending on your credit history) for 12 months. The rate on new purchases is 3.9% for six months.