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Posts Tagged ‘credit card’

Balance transfer game takes new twist

Wednesday, March 9th, 2011

It was not too long ago, we used to play the balance transfer game. We used to get the 0% APR promotional offer from credit card companies; there would be a transaction fee of $40 max and the promotional period runs for a year. We could transfer $10,000 from the credit card account to the checking account and put that $10,000 in a CD that could yield 3 to 4% per year. We used to get around $400 in interest for the $10,000 transferred from the credit card account with a 0% APR promotion. If you deduct the $40 transaction fee, you could still come up with $360 profit which is literally free money.

Now, the banking industry is getting smart… very smart actually. Many banks still offer 0% APR for one year. However, the transaction fee is 4% per thousand dollars. So if you transfer $10,000 from your credit card account to your checking account you’ll be charged $400 as transaction fee! On top of that, many CDs offer less than 1% interest. Effectively it will be a dumb move to use 0% APR because it is not really 0% APR. When you get the 0% APR offers in the mail or email, just trash them unless you are really willing to pay 4% APR.

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