I’m sure we’ve all gotten 0% balance transfer card offers in the mail, and many of you may have even taken them up on the offer. Unfortunately, people have a tendency to see that 0% and go “hey perfect!” but end up paying more than they did before.

Credit card companies, as a rule, aren’t nice. They don’t want anything except your money and those 0% balance transfer cards aim to take just that: your money. Today I’m going to cover just how exactly credit card companies manage to make money off you with 0% introductory rates and tomorrow I’m going to cover how you can do your research and be able to use these cards to make money.

The first thing to watch out for is balance transfer fees. These are generally more or less low, around 3% of the balance transfer with a minimum of $5 and a maximum of $50. If you’re transferring $2000, this would result in fees of $40, which is still something to consider, especially if you’re low on funds or using the 0% cards to try and make yourself some money.

Next, when you’ve got the card and are trying to activate it, the credit card company will try to sell you insurance. And trust me, they will TRY. Always refuse. I normally tell them that I have a savings account with $100 000 in it, so if I lose my job I’m not going to have huge trouble trying to make my minimum payments. This isn’t true (keeping 100k in a savings account before you’re retired is a terrible idea!) but it shuts them up pretty quickly. This “insurance” is nothing but a scam to get free money from you.

After you’ve made your balance transfer, the credit card companies still have ways to try and get more money out of you. The first part is by keeping you from reading the fine print. On balance transfer cards, most of the time the 0% balance is only good on transfers, not purchases. If you transfer $1000 onto a card with a limit of $1500 then go buy a new Nintendo Wii, not only are you going to be paying a full interest rate on that Wii (think 20%) but the spend part is what the credit card will pay off last. You would have to pay the full $1000 balance transfer amount before you can even start paying off that Wii.

Next, the credit card companies love to hit you with fees - and sometimes even take away your introductory rate - if you make even one late payment. It’s not unusual to see a $30 charge if you’ve made just one late payment on the card and it’s also not unusual to then see that 0% take a sudden leap to 19%. If you’re going to be using a 0% balance transfer card, you need to know that you’re responsible enough to ALWAYS pay that bill on time.

Finally, if you’re going to be using another 0% balance transfer card when your current deal ends, make sure you apply for it well in advance - at least four to six weeks ahead of time. This ensures that any problems that might be encountered can be settled and that you have enough time to be able to make the balance transfer before your introductory deal on your original card ends. This will ensure you don’t need to pay heavy interest rates for any period of time after the introductory period on your first card ends.

By making sure you know what you’re doing where 0% balance transfer cards are concerned, you can make sure that you actually are saving money, rather than spending more on fees and hefty interest charges than you would be had you stuck with your standard card.

 Stay tuned for tomorrow’s post on how to make money from these cards!

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