The Pitfalls of 0% Credit Cards

Two major credit-issuers are offering 0% interest rates on balance transfers, according to The Wall Street Journal. Sounds good, but watch out for the pitfalls associated with these "deals."

"Watch the fine print," says economist Steve Rick. "Like any business, the credit card issuers have to make money. Many do it through hidden fees, charges, and penalties.

Here's just a few of the ways some banks trick you into paying more than you expected:

Tricky Transfer Costs
The 0% rate on transfers may include a 2 - 4% charge for the transfer itself. At a 3% transfer rate, that's $240 on a $8,000 credit card balance.

Also, transfers from more than one credit card can cost you, because the bank may treat the transfer like a cash advance with hidden high fees and higher interest.

0% on all charges?
Most likely not. Often, banks will offer 0% on the amount you transfer only, and even that could be for a limited time. Often new charges carry a much higher rate.

Also, payments may apply to the transferred amount first. Meanwhile, the interest on new purchases keeps adding up.

Is it really "fixed?"
Not necessarily. It's legal to change the rate, as long as you are notified 15 days in advance. You know those fine-print inserts with your last bill? The ones you never read? Watch for interest rate changes. Also, look closely at your bill each month to see if the rate has changed.

Send a payment a couple of days past the due date, and you may find your rate jump as much as 19.99%! Some cards now only allow two weeks until the payment is considered late.

Shady Accounting?
Watch for credit card statements that use a "two-cycle" system, which figures your interest by taking the average daily balance of two months. You would end up paying interest on charges you made the previous month--even if you paid the full balance!

Watch the Fees
Some cards have fees for everything. There are annual fees, late fees, fees for exceeding your credit limit, fees for increasing your credit limit, fees for not using the card often enough, and fees for paying off your balance.

Go With An Issuer You Trust
Shell New Orleans Federal Credit Union is a not-for-profit financial services provider that exists to serve our members. For this reason, we have a vested interest in giving you products that save you money AND supply you with straightforward information.

Apply online for your Shell New Orleans Federal Credit Union Platinum Visa Card today. Or feel free to call us at 504-728-4853 or 866-FOR-MY-CU.