May 20, 2016
I received the following email last month
In the terms and conditions:
What does this [You will lose your interest-free grace period on new purchases unless you pay your entire balance in full (including the balance transfer amount and any balance transfer fee, if applicable).] mean?
It seems that I shouldn't use my Rogers credit card after the transfer. Otherwise, any new purchases will begin to accrue interest right away. Am I right?
November 18, 2017
That's the way most of these "balance transfer" schemes work these days. They weren't always like that, but greed will out. And they didn't have "balance transfer fees" which make them barely worth using. The transfer fee amounts to a FULL YEAR at the fee rate (2% in this case), as opposed to the 1/12 rate per month charged on outstanding balances at the usual annual interest rate (which is typically 21% or more these days - less than 2% per month). And you have to pay it up front on the full transferred balance, which would be shrinking as you pay it off at regular rates.
There's little benefit in these transfers for most users, unless they have a very bad rate on their other cards, possibly because of late payments or defaults, and keep the 0% (or lower-rate) balance at its maximum. And don't buy anything on that balance-receiving card until it's paid off. Read agreements carefully and ask questions, as you wisely did. Do the math.
Credit card issuers have always been happy to take advantage of the opacity of their Terms and Conditions. You have to understand their rules about how payments are applied to debts. Most of the time, the lowest-interest debt gets paid off first! With this type of transfer, you MUST avoid using the card receiving the transfer or you lose the reduced interest rate. Make sure you have an alternative way of payment. It's a good policy to always keep at least one card at zero balance and make all your new purchases on it, paying them off before due. That way you always buy in the interest-free grace period for your new purchases.
I think of how many (easily over twenty!) people have told me (or told financial TV/radio programs) they thought they never had to pay interest as long as they made their minimum payment - despite interest appearing on their statements regularly! And that they thought that "Balance Protector Insurance" would pay off their balance if they were sick or lost their jobs! (In fact, it just pays the minimum payment, and in very limited circumstances - and most issuers pay their salesthings to tell victims it's compulsory!) Not to mention that the BPI is charged for at an extortionate rate (3% and up) on all current charges, even when the account is not carrying a balance! It's a slimy rip-off.
If you have Balance Protector Insurance, look into its terms and consider canceling it. CBC Marketplace has done exposes on it.
May 20, 2016
Thanks, RetirED. I used Canadian Tire MasterCard to pay my kids tuition of over $10,000 and thought about transferring this balance to Rogers Bank MasterCard, so I can keep $10,000 in a savings (or 1 year GIC) account with 5.5%-6% interest rate for one year instead of paying off now.
I will probably just pay off the Canadian Tire MasterCard balance of over $10,000 next month after I receive the statement.