Another Credit Card Blindside
Recently, I received a balance transfer offer from Bank of America for one of my cards that has a $0 balance. The offer is for 5.9% fixed for the life of the loan.
At first, the balance transfer small print looked like the usual–3% of the balance transfered with a minimum of $10. But it was called a Cash Advance Fee, not a balance transfer fee. Then I noticed some new fine print. Here’s what it says:
"This fee will post to your account as a cash advance fee and receive the Standard cash advance rate. "
I called BofA and asked what that rate is. The answer: 24%. And, of course, payments are applied to the lowest rate part of the loan first.
Let’s assume you transfer $5,000 with this offer. The fee will be $120 and the interest on that $120 will be $28.80 for a year. If you take a year to pay off the loan, you’ll pay that $28.80 plus the 5.9% interest, plus the 3%. At the end of a year, you will have paid around 9% interest.
So would this be a good offer. Only if you are paying more than 9% now on the $5,000 you are transferring.
