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Billboards and magazine are rife with advertisements promising low introductory rates or interest-free
months for credit cards if you transfer your balance from an existing card to their credit card.
Savvy consumers can save significant funds by taking advantage of these offers, but for the rest of us
balance transfer can be a deceptive trap.
Credit card companies offer enticingly low introductory rates on balance transfers as a way of luring
customers away from their present credit cards. Once you have transferred your balance, chances are you're
going to keep making purchases on your new credit card.
Transferring your debt from a credit card with a high interest rate to one offering you a low rate is a
great way to cut down on your interest payments – but only if you use the credit card wisely. There are some
hidden secrets that make balance transfers less attractive than they first seem.
• The low rates typically only last for a short period of time, sometimes six month or less.
• Only the balance transferred to the credit card gets the low rate. Any new purchases made on the card or cash advances have higher interest rates which may be much more than your previous credit card. Cash advances on any credit card usually carry high interest rates.
• Payments made to pay off the balance on the credit card will first go towards paying off the balance with the lower interest rate. That is, any new purchases will continue to build interest at higher rates until you have completely paid off the balance transferred.
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