Avoid getting stung by interest-free debt transfer offers
If you are dealing with a lot of debt, more than likely you have come across those supposed interest-free offers out there that allow you to transfer your debt from high interest credit cards to cards that offer no interest on the balance that you transfer. Although some people have been able to use these interest-free debt transfer offers effectively to get out of debt, there have been many people who ended up getting stung by these offers, failing to read fine print and getting into even deeper debt. Although there may appear to be some benefits to using these debt transfer credit cards, there are many dangers as well. Most companies aren't going to offer these deals unless they feel it will be lucrative for them, which should definitely be a warning to consumers. If you are considering one of these interest-free offers, here is a look at some of the main dangers you may be facing.
There May Be Big Fees to Pay
One of the dangers you may find when you go with these credit cards that offer you interest-free offers is that you may end up paying some big fees. Many of these companies will offer you the transfer interest free, but often they'll charge you a fee when you make the balance transfer. This fee can be about 3% of the total balance that you are transferring, although some companies will cap this fee at about $75 or $100. However, this fee can actually negate the savings you could get with this offer. Before you decide to go with one of these offers, read the hidden loan terms and conditions and find out if there are fees applicable when you do transfer a balance.
What Happens if You Miss Even One Payment
So what happens if you miss even one payment when you choose one of the interest-free offers given to you? In most case, your 0% interest is going to be instantly hiked to a higher interest rate. Even if you are a day late on the payment, this could happen to you. Although it definitely is best to insure that you pay on time, if something goes wrong and your payment is late, then you are probably going to lose that 0% interest rate, and in many cases the interest rates that you will get is extremely high - in some cases, 20% or higher. This is another danger that you have to consider when deciding whether these transfer loans are the right option for you.
Putting More Purchases on These Cards
Another danger of these credit cards that offer 0% balance transfers is that when you start putting more purchases on the cards, problems occur. Most people don't read fine print before going with one of these offers. They don't realize that the 0% interest is only good on the balance transfer itself. This means that if you make a purchase with the card or you take a cash advance, there will be interest charged on those purchases. Many of these companies also apply the payments you make to the original balance transfer, essentially burying the other charges so you continue to build up a lot of debt in interest over time. This will end up costing you instead of saving you money and helping you to get out of debt. If you should ever decide to choose this route, this is one huge danger to watch out for.
The Rates Often Get Bumped Up
If you take a look at the hidden loan terms and conditions, you'll find that the rates on these interest-free offers often get bumped up. Usually the 0% interest is only good for a limited amount of time, although you may not initially realize this. In many cases the 0% interest rate is only good for 3, 6, or 12 months. Then the interest rates go up, and the rates they go up to are often quite high. Companies count on the fact that you're not paying attention to this and before you know it you have build up more debt due to the interest rates and you've done nothing to work on actually getting rid of your debt.
You May Never Pay Off Your Debt
With these interest-free offers, you may never be able to pay off the debt you have. It is very easy to get into the circle of continually transferring your debt between credit cards while never actually getting rid of it. With many of the dangers that come along with these deals, you actually put yourself at the risk of accruing even more debt. In many cases it is best to avoid these offers, and if you do choose to try one of these offers, always read fine print to make sure you are well informed and aware of the possible dangers and pitfalls.