0% Balance Transfer Offer That I CAN Refuse

Normally I encourage people to take up 0% balance transfer offers and I wish I would get more offers myself. However, I must warn you that just because it says 0% that does not mean it is always the best deal for you.

I just got an offer for a 0% balance transfers from one of my better cards….but after reading it carefully I decided to refuse the offer. Here are the terms:

* 0% until 04/09

* 4% balance transfer fee

Now I will talk about WHY I decided not to take the offer after all. First off I thought that I could take the offer and write myself a check and deposit the money in my ING savings account to earn interest. I would put the money in a 3 month CD to get the higher rate but still leave myself the flexibility to get the money out without a penalty, in time to repay the credit card.

Then when the balance transfer period was about to end I could just pay back all the money. This is also known as credit card arbitration, which is how a lot of people made money off their cards in the past.

This situation would not work for me however because ING is not offering any 3 month CDs right now. This means that I would just be getting the regular 2.75% interest rate…which might have been good if not for the balance transfer fee.

I was planning on taking out $3000 on the card, thus making the balance transfer fee come out to $120. At the current rate of 2.75% APY I would be getting about $6 a month on the account in interest for a total of about $27 in interest by the time I needed to pay back the money in full before the interest rate went up.

As you can see, $120 in fees is a lot more than $27 in interest so I would be faced with a loss here. I decided not to take the balance transfer offer and just wait to see what happens.

What would YOU have done? Please let us know in the comments.

Enjoy the New Year and follow along with me as I journey through next year on my way to becoming debt free!!!!!!

If you think I made an error in calculating please let me know as there might be time to change my mind.

Author: Lulu

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4 Comments

  1. Yeah, I’d have turned down that offer too…

    The key, as I’m sure you already know, is to hold out until you get the zero percent offers (or even .99% or 1.99%) with a cap on the transaction fee…

    Lately, most of my offers have a 3% transaction fee with no cap — they’re instant trash.

    But every now and then you come across one where they set a max fee at $75 or $99. On those, provided the offer is for more than 8 months, I’ll cash out 5-figures every time… These days, that’s the only way you can “win” the arbitrage game…

    brainy’s last blog post..Smurfling Update: 140 Down – 140 to Go

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  2. Ooh! Good post. I’m really not about “making money” off credit cards – but that’s just because we’re too poor right now! 😉

    I got hooked up with a 0% for 1 year with NO balance transfer fees last August. I jumped on it because we did some home improvements and just put stuff on the card. Also, it was 0% on balance transfers and ALL purchases until this coming August. So I transferred about $200 just to get the offer and have stopped using it so we can pay it off before August – if we don’t pay it off, we’re stuck with some ridiculous rate of 14% or something.

    Also – I was really hoping to get a 0% rate and NO balance transfer fee and I lucked out. I got about 4 offers in a row – and each of them got a little better over time. First it was 4% Balance Transfer fee, then 2 3% Balance Transfer fees, then the max of the balance transfer fee was $100, and then all of the sudden, the 0% with No transfer fee came. They all came from Chase. So sometimes it helps to sit and wait a little.

    Also, double check your current credit cards. The one I use the most is down to 6.9%! I think it was 12% when I opened it years ago but because of the economy and all that other stuff, it has gone down significantly.

    Becky’s last blog post..Shaw’s!

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  3. That’s the worst tranfer deal I’ve ever heard of! As if the 4% fee with no cap wasn’t bad enough, they’re only offering 3-4 months?? Not worth it no matter what your motivations for seeking out a balance transfer offer.

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    • Yeah it was pretty silly. I think someone was not thinking when they made that offer…or maybe it was a typo. 🙂

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