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Credit Card Sleight-of-Hand

Hi Dayana. I have a strange question. I'm in a rather peculiar predicament. I recently opened a Discover card with what I thought was pretty tremendous offer -- 0% interest for 12 months on balance transfers, 8% APR (have always paid my credit cards in full each month, so no worries there), and a small amount of cash back on gas. So I did an initial balance transfer of another 0% card that was expiring May 31st, [and] all went well.

I then bought some new clothes at Macy's with a Macy's credit card and transferred that balance as well. Finally, I bought an airline ticket present for my Mom and transferred that also. Pretty nifty deal I thought.

Then bought about $75 worth of gas (California prices!) with the card over the course of my first four weeks. When I got my first Discover card bill it was $52. I thought this was odd considering the number of current charges (thought it should have been $75 plus payment towards my 0%). Lo and behold, I call them up and I have to pay off all the balance transfers before the current charges.

So now I have seventy five bucks buried underneath a few thousand for a year. This isn't that big of a deal considering 8% APR, but... it's going to start to add up really quickly (the dark side of compounding). I can't very well go to the gas stations and get my money back (would they stick a vacuum cleaner down my gas pipe?). And I seem to have no options towards paying that money off. Short of paying off the thousands of dollars current at the 0% rate, do I have any alternatives here? Sorry for the long email, but I am at wit's end and the interest starts accruing in about two weeks! -- Baited and Confused

Dear Dazed Fool,

Unfortunately your predicament is not that peculiar, nor is your question strange. It's the exact one that comes up when good people innocently goof up a sweet deal. Balance-transfer promotions can be a great way to buy some low-interest (or interest-free) time between purchases and payment due dates. Transferring existing balances from higher-interest-rate credit cards is also one of the methods we recommend for those trying to accelerate their get out of debt plan.

The kicker: You've got to read the fine print, which goes something like this: "By the way, if you put any new charges on this card they will be subject to a higher interest rate and will be last in line to be paid off. Have a nice day!"

Until you can find a way to siphon the gas from your car and get the station to refund that dough, I'm afraid you're stuck with the situation... unless of course you want to transfer that card's balance to another 0% card and start all over.

When you're tempted by future offers, ask these key questions before signing on the dotted line:

  • What does the offer apply to?
  • How long does the low interest rate offer last?
  • Do I qualify?
  • Do I need this card to make other purchases?
  • Can I pay my bill on time?

For more credit-related Foolishness, see:


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Dayana Yochim
TMFSchool

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