Friday, August 12, 2005

Promotional balance transfers: Careful!

Credit-card companies are so aggressive with those promotional free or very-low-interest balance transfers that I have always assumed that they make money somehow even if you pay off the balance at the end of the promotional period. I just figured out how: If you read the fine print of your agreement, low-interest balances are paid off before high-interest ones. What that means is that after you've opened a card and transferred a balance to it at some very low or zero interest rate, if you charge anything else on that card, you're going to pay interest on those items at your normal purchase rate until after you've paid off the entire balance transfer amount! Well, I'll show them: I put the card in a drawer, unused, and I just won't use it until the balance transfer is paid off. By the way, this is a Citibank card that pays not only the usual 1% cash back that many cards offer, but pays 5% at supermarkers, drugstores, and gas stations. Email me if you'd like to know more.


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