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What's the Catch With Credit Card Freebies?

Aug 17, 2007
You've certainly heard it said that there's no such thing as a free lunch. If you believe that, then you must be eyeing the current crop of 0% balance transfer cards with a wary eye, wondering where you'll find the catch that makes it not so free. The answer is - as it usually is when it comes to contracts - in the fine print. And the truth is, if you manage yourself wisely, you'll find that the cost isn't nearly so hard to swallow as the plastic chicken dinners that often masquerade as free lunches at banquets.

Now that I've stretched that metaphor to the breaking point, let's take a serious look at balance transfer credit cards and how they can work to help you get out of debt faster - and at far less cost than you'd think.

Balance transfer credit cards arose as a sales gimmick, a way to overcome customer loyalty to their favorite credit card company and entice them to switch over to a new one. The original balance transfer credit cards offered 0% interest on a balance transferred from another card for 6 months, 9 months or even a year. You paid a typical APR on any other charges made on that credit card - and that was part of the catch. Payments made on balance transfer cards are typically applied in whole to the transferred balance. That meant that as long as anything remained unpaid on that balance, new purchases sat on your balance accruing interest.

Some balance transfer credit cards had other catches as well. Unless you took the time to compare balance transfer credit cards, you might find that you were actually paying more in balance transfer fees than you would if you simply left the balance where it was and paid it off. A few required that the balance must be paid in full by the end of the introductory period, or you'd have to pay all interest that would have accrued at their typical rate in the month after it ended. And of course, there was always the typical APR that took effect AFTER the introductory period ended - which could be higher than your old credit card.

Savvy consumers caught onto the catches pretty quickly, though, and soon found loopholes that allowed them to simply shift balances from one balance transfer credit card to the next without ever actually paying off or paying down the balance. That's led credit card issuers to devise new 0% and low APR balance transfer credit card schemes that cater to those that transfer their credit card balances in good faith. These days, you'll find a wide variety of balance transfer cards available with differing schemes, making it more important than ever to compare balance transfer credit cards before you apply. Among the newest and best of these new cards are those that will offer you a very low APR on your transferred balance - for the entire life of the balance. That means that no matter how long it takes you to pay it off, you'll continue to pay the introductory interest rate which is sometimes still as low as 0%.

If you'd like to apply for a balance transfer credit card, but aren't sure which one is your best option, you can compare balance transfer credit cards at good comparison sites. You'll find everything you need to review credit card offers, compare them with one another and apply for balance transfer credit cards online. Take the time to read the fine print, and you just may find that there really is such a thing as a free lunch - or at least, a 0% balance transfer credit card.
About the Author
Jon Francis has been involved with finance for many years! With an in-depth knowledge of the credit card UK market help helps others get the best from a credit card.
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