So I have found myself having the wonderful and rare occurrence of receiving a 0% 12-month balance transfer offer. It would be a great way to consolidate my last couple remaining credit cards that I could not get a 0% offer on. Over the past couple of years I have felt forced to apply for credit cards. I was thoroughly content with the three credit cards I had. Then BofA bought all of the companies that owned my cards and I couldn’t do any balance transfers; they effectively tied my hands into 15-25% interest rates.
So I applied for a Discover Card last year, but I still have a couple cards with balances that I couldn’t make the math work to move around. And since the 12-month offers that I had received are coming to a close, I need the option to move some balances around again. On the surface it seems like a great idea, but I’m still hesitant.
#1: I’m not sure how applying for new credit is going to effect my FICO score, especially now that Experian won’t tell me how it’s effecting me.
#2: I’m not actually getting a 0% offer, but rather a 3% offer due to the balance transfer fees.
#3: With the current economic situation I sometimes feel paralyzed to make a change.
In the end I will make the change, the after BT interest rate would be the best of all my cards. It will be a cash back card, and my goal after paying off all my debt is to never pay full price for anything, and 1-5% back helps me get there.
FYI: I chose not to opt out of pre-screened offers so that I could keep my options open (and my shredder running well). I have received MANY 0.99% and 2.99% offers, which in my mind are still better than the average 10-15% interest rates on credit cards these days, but this was the first 0% offer in over six months, quite a change from before.
{ 2 comments… read them below or add one }
Interesting way of looking at the balance transfer fee: As an effective APR. I suppose it makes sense.
That said, 3% compared to 15-25% is a pretty good deal.
The way I decided was pretty simple: I looked at the interest accrued in a month and compared it to a balance transfer fee. It usually more than paid for itself within three months — usually by the second month.
I know FICO scores are golden, but really, unless you’re planning on getting a new car or a house in the next year or so, I think you should focus on paying down debt. (Though I know there are articles out there about how these cards affect FICO. So you could do a search.)
One last note — and one I sincerely hope you already know — use that card ONLY for this balance transfer offer. Don’t be tempted by the cash-back deal to put new purchases on there. (Also, be sure to read the fine print and find out if balance transfer offers do count toward your cash back.)
Good points Abby! I forgot to mention that one of my hesitations is we are considering buying a house by November. Prices are so low that it’s cheaper to buy a house than it is to rent an apartment here. And we actually have a place where our BT credit cards go, so they don’t get used until the card is paid off. (The only time we ignored the rule was a card that had 0%BT and 0% purchases for 15 months.) I agree though 3% is far better than 15%. Thanks for reading!