“You Should Write About This…”

Melissa walked in brandishing a large piece of paper.  “You should let people know what a bad deal these are.”

I took a look, it was a set of checks from a client’s credit card issuer.  It invited us to “Write a Check Now.  Pay it off later.”

“Hey, Melissa!” I yelled down the hall. “What do you want me to tell the people?”

“The checks look all good and tempting now, but you might as well sign in blood and sell your soul to the Devil.”

Perhaps she was characterizing the offer unfairly.  I took a closer look.

“0% APR through your billing cycle that ends in 09/2011”

Ok, not too bad.

“When the Promotional period(s) end on the date(s) listed above, you will be charged 17.24%, the standard APR for Balance Transfers.  This rate will vary with the market based on the Prime Rate.”

Gag.  Who would want a variable rate, especially with interest rates currently at tremendous lows? I wondered.

Fee:…”

Ah-ha!

“…Either $5 or 4% of the amount of each transaction, whichever is greater.”

Ok, it wasn’t rediculously out of range for balance transfers.

Paying Interest: We will begin charging interest on these transactions on the transaction date.”

There it was!  The bad, bad deal!  If you didn’t pay it off within the promotional period, you would be charged interest from the purchase date.  So, let’s do some simplified math:

Spending the Balance Transfer check: $520 ($500 spending +$20 fee($500 x 4%))

Interest accrued during the promotional period: $89.65 ($520 x 17.24% [vastly oversimplified for clarity, and likely on the low side])

Paying over six hundred dollars for five hundred dollars in spending a year ago because you didn’t write it down on your calendar, because, seriously, who writes this stuff down?: Priceless.   $609.65

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