Expensive Penny, I’ve simply acquired a steadiness switch provide. Is it too good to be true?

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Dear Penny,

I have three high yield credit cards, two with near maximum credit, and I've just been offered a 1.9% credit transfer from my bank for up to nine months.

However, the bank's speech accompanying this offer seemed to hide details, such as how interest rates change after nine months.

My flag "too good to be true" is high, and I do not want to top up the debt that I owe after the offer expires.

Can you bring some light into this practice before I make a bad decision?

-R.

Dear R.,

Banks want you to pay attention to this dazzling low APR and ignore the bank talk.

Note that credit card agreements average almost 5,000 words. They require a reading ability about two degrees above that of an average American. Banks make a lot of money because most people focus on the first annual rate of 1.9% and ignore the other 5,000 words.

I welcome your skepticism and urge you to take a credit card offer with the slogan "Is that too good to be true?" To watch.

With a Balance transfer credit cardTransfer your debts from one or more cards to a card with a low introductory rate, sometimes zero percent. Many people are successfully using prepaid cards to get out of debt faster and save interest.

By offering an account balance transfer card, your bank will try to keep you away from your current card companies. They pay a lot of interest in these companies. Your bank would like to have the pleasure of charging you all these interest and you are ready to fight for it. They therefore offer you a temporary low interest rate offer in the hope that you will still have debt at the end of these nine months.

To find out if you want to play this game, look for a few things in all of the banking mumbo jumbo.

The first thing to look for is the fees. You will normally pay a fee of 3% to 5% of the transfer amount. This means that if you have a total balance of $ 5,000 and a 3% fee, you start with $ 5,150. Many credit transfer cards also charge an annual fee.

However, these are usually pretty simple. And considering that credit card APRs are often over 20% at the high end, you can save a lot of money on interest as long as the charges are reasonable.

Where banks are really sneaky is on all APRs.

The 1.9% rate you have mentioned probably only applies to the sums paid. There is probably a much higher APR that applies to any new purchases you charge for the card.

Also pay attention to the regular annual interest, d. H. The interest you will be charged at the end of these nine months. Many people find that the regular APR on their account balance transfer card is a few points higher than the APR on their existing cards.

Many agreements also stipulate that the bank can cancel its APR if you make late payments or miss them altogether.

Because of all the hassles and conversion of the APRs, I recommend using an account balance transfer card only if you have enough monthly budget to completely eliminate your debt during the promo period. You also have to solemnly swear that you will not make any additional purchases with this card.

If you choose this route, I recommend that you look around before taking advantage of this offer. Nine months is a relatively short promo period – many cards offer between 12 and 21 months, and a longer period of low interest gives you more leeway to eliminate that debt. Bonus points if you qualify for an interest-free action.

However, if you know that you can not repay your debts during the introductory phase, a Debt consolidation loan can be a better option. Sure, you pay more than 1.9% interest, but you get the simplicity of a fixed monthly payment, and you do not have to juggle multiple APRs.

Remember that banks make a lot of money because people do not know what they are signing up for. Do not be one of these people. Handle future credit cards and loans with the same care you use for this offer and you will fix it.

Robin Hartill is the editor-in-chief of The Penny Hoarder and the voice behind Dear Penny. Send your credit card questions [email protected]

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