Dear Liz: Can we really trust the banks anymore to adhere to the terms they offer us? I liked your suggestion about using low-interest-rate balance-transfer offers to speed up debt repayment. However, one of my credit card issuers has both increased my minimum payments and lowered my limits on my credit card and line-of-credit accounts. When I asked why, they said, “Because we can.” So when they send me a set of balance-transfer checks with a 1.99% interest rate, I don’t trust them to keep their word. Now I am just concentrating on paying off the balance as soon as possible and will keep the card only for emergency use.
Answer: Balance-transfer terms aren’t quite as sacrosanct as they used to be. A few lenders have boosted their minimum payments, and Chase tried charging a $10-a-month “inactivity fee” before customer outrage forced it to back off.
But the biggest risk with balance-transfer offers right now isn’t that lenders will renege on the deals midstream. A greater concern is that the good deals are getting scarcer. It’s possible that when the low teaser rate you’re offered expires, you might be stuck with a double-digit rate and few options to get a better deal.
If you can pay your debt off before the low rate expires, and you would save money even after taking into account the 3% to 4% balance-transfer fee most lenders charge, then you might want to consider one of those low-rate deals. Otherwise, consider looking for a card with a low regular interest rate. Check with your credit union, sites like CardRatings.com or Credit Cards.com, and the finance forum at FatWallet.com.
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