I like to read real-life stories when it comes to dirty credit card secrets. Theories and hypothetical scenarios are great, but a real life scenario is a sure thing, and that’s what I want when it comes to my finances.
One trick they pull (which happened to me) is to give you one percentage rate on the amount you transfer while giving you a higher rate on the new purchases you make. They’re counting on you to make a lot of new purchases.
3 years ago I accepted the following 0% balance transfer offer: “0% on your transfer for 6 months, but you can keep that rate going indefinitely provided you make 2 purchases a month on that credit card thereafter.” What’s the hitch? After thinking about it for a while I realized that sure they were planning on giving me the 0% indefinitely but only on the amount I transferred, not on the 2 new purchases I was going to make every month. A fairly high percentage rate was going to be applied to those new purchases. Sneaky.
So I turned it around on them. The goal was to make as small a purchase as possible twice a month. The least you can charge at most stores is $1.00, and that’s probably what their model was based on. The credit card company was counting on so many consumers making 2 purchases a month at a minimum of $1.00 per purchase, making it $2.00 a month for each consumer. After a while that adds up for them, especially if the percentage rate on those purchases is pretty high.
I managed to find a way to charge only 3 cents each time twice a month for a total of 6 cents a month. What I do is I charge 3 cents every time I fill up my car with gas. I use one credit card to do the actual filling up and then I take my “0% card” and put 2 or 3 cents additional gas. Since I only fill up my car about twice a month it works out nicely. I’ve been doing this for 3 years now and my finance charges are just 50 cents a month as opposed to the more than $30.00 a month it used to be. That’s a combined total of $1080.00 savings over 3 years, And that’s not counting the interest saved!
What’s the point? Well when you have a certain amount of debt, it’s obviously beneficial to be able take any amount of that debt and find a way to stop accruing interest on it. Since the amount I have on the 0% credit card is about $2500.00, in essence what I’ve done is the equivalent of taking out a $2500.00 loan and just paying 50 cents on it per month. And of course there’s no interest on it since it’s 0%. The $1,080.00 I saved I’ve put towards my other debt – not new purchases, I promise.
Update: after several years of benefitting from this fantastic 0% deal, they have finally changed the terms on me. It’s a sign of the times. Now I’m paying $15.00 a month, so naturally I will be paying it off soon, but I’m grateful for the break I got.