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What I Did Wrong when Doing a Credit Card Balance Transfer
When I got a letter from a credit card company about how I could save money by doing a balance transfer, I thought it sounded like a great idea. So I transferred the balance I had on one credit card to this new card I opened. But there were things I did not understand about the process and costs I did not take into account. Here is what I did wrong.
Interest Rate Length of Time
The company I did the balance transfer with indicated that I would have a zero percent interest rate on the balance I transferred over. But that zero percent rate only lasted for six months. That six months started when I began the balance transfer process, not after the first bill as I expected it to. After that I ended up having to pay a higher interest rate on that balance than on items I purchased with that credit card. I did not pay attention to the fine print that indicated I would have to pay this higher interest rate.
Interest Rate Confusion
Because I ended up paying a higher interest rate than what it was for purchases, the interest rate I ended up paying was higher than the interest rate on the card I originally had the balance on. This meant that in the end I ended up paying more money in interest to pay off that balance than if I had just left it on the original card.
Balance Transfer Costs
They charged me a fee to transfer my balance to their credit card. Again, I did not read the fine print that indicated I would have to pay to have the balance transferred to the new card. This fee ended up being about $100 and was something I had not factored in when deciding to do the balance transfer.
While I saved money in interest charges for six months, I actually ended up spending more money because of the interest rate on the new card. If I had it to do over again, I would call the credit card company before doing a balance transfer to ask them questions instead of just filling out the paperwork and sending it in. I would ask what interest rate I would pay on the balance transfer after the zero percent rate expired. I would also ask if there are any fees involved with the process.