Balance Transfer? Beware!

Balance Transfer? Beware!
by Justin Ripley
Knowing the ins and outs of balance transfers

When I was in college, I got a summer job working at a call center for a major credit card issuer. When I first got the job, I thought it would be great. In an air-conditioned office, I would be sitting down and talking on the phone. It sure sounded a lot better than working on the construction site in the hot summer sun. However, after six weeks, I could no longer take the monotony of the job and the constant abuse on the phone. (We were telemarketing, of course.) So, I quit
the job but not without learning a great deal about the intricacies of the credit card industry. I also learned a number of tips that can help save you money.

Almost everyone has a credit card, usually several, but it's been my observation that most people don't really understand how they work. The credit card companies, of course, prefer it this way, as it makes it easier for them to make money on you.

You've probably received them. Calls or mail from credit card companies, soliciting you to transfer a balance from another credit card account to their credit card. It sounds like a good deal. They tell you that you can move an existing balance
from your MasterCard where you might be paying 19% interest to their Visa card where you will only pay 3% interest. They can tell you how much you'll save in the very first month, and if you're talking about a significant balance, the savings can
indeed be substantial. So, what's the problem? Why not take advantage?

Trick 1: It's Temporary

The first thing you need to know is that the balance transfer rate is temporary. It often lasts for only six months or maybe a year. After this period, the rate will skyrocket to something more like 19%. Most people know this though and can plan accordingly to pay the amount off before the rate goes back up. It's the most basic trick. In fact, I'd allege that it's the one they want you to see. If you think you know the trick you lower your guard, then they trick you again!

Trick 2: Those Devilish Details

"Payments will be applied to balances with lower APRs prior to balances with standard APRs." That statement or something similar to it will appear in the fine print of the offer. If you're being sold a balance transfer over the phone, the
salesperson is actually required to say it. But what exactly does it mean?

Generally, your credit card company distinguishes between different types of card use and the associated balances. Let's call these "buckets." The first bucket is the most common. It is the bucket where all purchases on your card go and it is
almost always at a high rate of interest. When you go out and buy a new HD television on your credit card, this is the bucket it falls in. A month later, you get a bill, and if you don't pay off the balance in full, you'll pay the high rate on
the remaining balance.

Bucket two is for cash advances. This is also at a high rate of interest. Sometimes even higher than the purchase rate. Some people are not aware of it, but you can actually use your credit card to get money from an ATM machine in the form of a
cash advance.

Bucket three is reserved for balance transfers and it is often a rate that is considerably lower than the other rates available on your card. This is where you most often see those 3% or even 0% introductory rates.

So, this is where the tricky business kicks in. Let's say you transferred $1200 from another card (Card A) to a great 0% interest rate offered to you by a competing card company (Card B). The introductory rate only lasts for six months, but you figure you can pay it all off by then by simply making monthly payments of $200. Instead of paying 19% on that balance, you'll now be paying 0% and saving a bunch of money. Then, after you make the balance transfer, you go out and purchase a bunch of stuff at Wal-Mart and use that same card. Maybe you also buy some gas. Heck, maybe it was an existing account and you were already holding a balance on it.

That $200 that you pay will first be applied to the balance in the 0% bucket. The balances sitting in the other buckets don't get paid off at all, and thus grow by the rate of interest being charged. The credit card company has effectively set up
a barrier preventing you from paying off those balances that are at higher rates of interest. Until you pay off all of that balance transfer, you will not be able to pay down the other balances. It's very tricky indeed.

A Few Other Things to Watch Out For

If you miss a payment, the introductory rate will be lost and revert to a much higher rate. Also, look out for fees that may be associated with the balance transfer. Often there is a one-time charge of $75 or more to transfer a balance.

To Transfer or Not to Transfer

Balance transfers are not all bad. If used correctly, balance transfers can be an awesome tool for saving money on credit card debts. You just need to know the ins and outs of how it all works. The credit card company relies on the fact that
people don't understand the intricacies. Do you think they'd make any money giving people such low rates? However, if you do understand the tricks and the pitfalls to avoid when using them, you can save yourself hundreds or even thousands of
dollars!

Take the Next Step:
- If considering a balance transfer, be sure that you understand all the tricks and the pitfalls. It can be an awesome tool in your financial arsenal ... if used correctly.
- Compare various balance transfer credit cards


Note from Lucy: I thought this article was very informative and wanted to pass it on. Banks are always looking for a way to make money off of it's customers and this is just a few of the tricks they use to lure us in to their special offers. If you are thinking about transfering a balance, the trick is in the fine print.....

Have a great week everyone.

The price of rice is going out of sight……

I told you all about the price of wheat basically doubling in price, well once again a staple item, namely rice, has now doubled in price in the last six weeks. Tonight on the news they were announcing that Sam’s club, as of today, was limiting how much rice a person could buy. You are now allowed to buy four bags of rice per person. I found out from a friend that they have been limiting rice sales at Costco too. When TF. Left tonight for his church activity, I went to the Hong Kong food market and started pricing the rice there. I had my little notebook out writing things down when a little man, standing next to me, said “Three weeks ago this cost $ 12.50 cents and look at the price now”. He said this in the best English he could muster while shaking his head. This was a good quality of Jasmine rice in a 25 lb. bag for $ 21.75. I decided to head for Food Town where I found that the 4lb. bag of rice that was on sale last week for 99 cents was now $ 1.99. I decided to look around the store for prices on other brands. I found a 20 lb. bag of long grain white rice for $ 4.99 a bag. The little calculator, in my head, started computing how much that was per pound and it came to 25 cents per pound. I called a friend and she asked me to get her 2 bags and my married daughter wanted one bag. I ended up with six bags of rice. I will put this into appropriate containers and have it in storage for months to come. If you eat rice, you might consider stocking up on some before it goes up any higher.

Now, to go along with that rice, here is an awesome recipe for Arizona Chuck Wagon Beans that I found on the Chetday.com website.


Arizona Chuck Wagon Beans

1 lb dried navy or pinto beans
6 cups water
1/4 pound salt pork, diced
1 large onion, chopped
1 garlic clove, minced
1 large green pepper, chopped
1 1/2 pounds chuck steak, cubed
1 1/2 tsp salt
1/2 tsp oregano, crumbled
1/4 tsp red pepper
1/4 tsp ground cumin
8 ounces tomato sauce

Pick over beans and rinse well. Combine beans and water in a large kettle. Bring to boiling; cover; cook 2 minutes. Remove from heat and let stand 1 hour then pour
into slow cooker.

Brown salt pork in a large skillet; remove with a slowtted spoon to cooker; saute onion, garlic and green pepper in pan drippings; remove with slotted spoon to
cooker. Brown beef, a few pieces at a time in pan drippings; remove to cooker with slotted spoon; stir in salt, oregano, red pepper, cumin and tomato sauce. Add
more water, if necessary to bring liquid level above beans.

Cook on low for 10 hours or on high for 6 hours, or until beans are tender.

Talk to ya later.......

Just Lucy talking....

No frugal advice today, I just want to talk. So much has been going on around here that I can’t seem to get it all done. I worked for 10 days straight working on the taxes so that I could take them over to the tax man in the best order possible. We don’t have a simple tax return, we own our own business and it requires a lot of paper work at times. I am so glad that my part is done, now it’s up to the tax man to finish it before the 15th. It feels like a ball and chain has been released from me and I am free for a while.

Tomorrow night I take my General Class Amateur Radio license test. I have been going to class for five weeks now and the time has come to take the test. This is much harder than I ever thought it would be. I have had to learn all about frequencies, radio bands, all kinds of electrical stuff, propagation, antennas, safety, and all kinds of mathematical formulas. This brain of mine is having a hard time processing it all and I am not sure if I will pass this test on the first round. If I don’t pass I will just study more and take it again in May. If you would like to see what one of the practice tests is about, click here and then click on General and give it a try.

Like Diane, I have been babysitting my two grandkids here and there and loving every minute of it, well almost every minute. JJ is 6 yrs. old and Jocelyne is 2 and a half. They really are good kids but they can wear Grandma out.

With my food storage calling at church, I have been very busy. Wheat prices are up almost double. Check out this article about the rising prices.

Here is a video from a bakery about the increases in anything made with wheat. I think you will find it very interesting.

So how does this involve me? Our church group is able to go in and dry-pack (put up) wheat at last years prices. The church is going thru its stores and selling it at last years prices until they run out. All of a sudden people are worried about food prices and they are working on their food storage…. As stake Dry-pack specialist, I am in charge of several groups of people who are working on their storage……I’m busier than a wet hen. Wait till they find out that rice is about to double in price….

I’ve also been listening to some of the presidential campaign rhetoric on TV and over the Internet. This has been a crazy campaign and I am ready for it to be over….fin…done. I’ve also been watching the news about some of the sadder things that go on in this world. We had a 14 yr. old middle school student who delivered a baby in the rest room of her school and then drowned it by trying to flush it down the toilet….She “claimed” that she did not know that she was pregnant…..How can you not know? I’ve had three kids and all three were “movers and shakers” in the womb. It is such a sad situation of what is going on in our society. Also something that worried me was the news of nine third graders who had planned, in detail, how to kill their teacher. The teacher had disciplined one of the students for standing on his desk…Is this a reason to kill her??? That took me a whole day to get off of my mind. I will bet that all of these students are allowed to watch whatever they want on TV. They see violence and think that it is perfectly acceptable…

On a happier note: Bonnie took JJ down to Ellington Field to see the return of the Astronauts a week ago last Thursday. They had returned from a trip in space where they had walked in space and visited the space station. They had flown in from Florida and were coming home to debrief. Bonnie and JJ got to talk and shake hands with all of the returning astronauts. Check out Bonnies blog for pictures and a funny story.

Well, have a great week everyone! Wish me luck on the test.