Sunday, April 02, 2006

Seeking those low balance transfer offers

When I've taken advantage of offers like Providian's 'low lifetime APR on transferred balances,' they've all been offers that sought me out rather than the other way around -- those 'you've prequalified!' flyers that arrive by the pound in my mailbox. The rates on those offers seem to be better than those dangled for fresh prospects hitting various card-lenders' websites. But if you're not getting sacks of decent offers in the mail, is there any way to seek out good rates? I'm throwing this out to the floor -- I don't know the answer.

Bankrate maintains a chart of low-rate cards, but none are particularly fantastic rates. Google Ads, of course, is all too happy to kick up hits for 0% APR offers, but I rather worry about the idea of picking a lender based on "L0W R@T3!!!!!!!" ads.

Two caveats to watch if you're going to transfer a balance to save on the APR. 1) Most lenders charge a transfer fee. The standard seems to be 3% of the balance, with a $5 minimum and $75 max. That can still be a good deal if you're transferring a large sum you'll be paying off over time, but it's good to know in advance if you'll get hit with the fee. 2) Think carefully about time-limited offers. Right now, when I log into my Providian account, it's dangling a 2% APR till next October on transferred balances. But come November 1, the rate shoots up to Prime + nearly 10% -- making it currently a 17% APR. Ow. It's tempting to say 'oh, I know I'll have the balance paid before the rate goes variable,' but I found that my timetable for that sort of thing slipped a lot. I vastly prefer paying slightly higher APRs for a life-of-the-balance offer.

Actually, two more caveats: 3) If you transfer a chunk of money to a card with a low-rate offer, don't use the card for anything else. Your monthly payments go first to paying off the low-rate principal -- while that $100 you charged for the new purchases racks up a sky-high new APR rate. Another lesson I learned the expensive way. I was paying nearly as much in finance charges each month for a $200 purchase as I was for a transferred balance about twenty times that. And 4) try not to make the mistake I did of missing a payment and watching your rate skyrocket. Sigh.