Want to ruin your credit rating this year? Then go ahead and shift all your debt onto a balance transfer credit card. These little pieces of plastic will happily shelter your holiday hangover debt with a 0% APR (during the bonus period) while subtle fees and restrictions slowly work to destroy your finances. Sure, the credit card issuers are marketing them as useful tools for fixing your credit score, not making it worse – but we all know that’s a lie. They really just want to harvest your debt. In fact, there’s a lot more to balance transfer credit cards than you probably know. Don’t believe us? Think back. Try to remember if your card issuer was up-front about these fun facts:

1)    The 0% APR will end sooner than you think. When you see a little asterisk attached to the “0% APR” on a credit card offer, it means that your interest-free haven is going to expire before you know it. The grace period on balance transfers might seem like an eternity at around 21 months, but you need to think realistically. It takes the average person years to pay off even a small balance. If you can’t zero yours in 21 months, you’re going to be slammed with a lot of interest. Hard.

2)    There are fees. Lots of fees. In order to gain access to the 0% APR bonus that balance transfers are known for, you’re going to have to pay the cover charge. Most cards typically charge a percentage of the total balance you intend to transfer, and the average rate this year is 3%. That might sound small, but it translates to a $30 toll for someone with a $1,000 balance and $300 for someone $10,000 in the red. In many cases, it makes more financial sense to just pay off your debt on the original card – even if that card has a comparatively worse interest rate.

3)    Buying anything with the card will create interest-accruing debt. Under new regulations, credit card issuers are allowed to require you to pay off your oldest debts before you add any new ones. When you make your first purchase with a balance transfer, you begin a new balance – one that stays separate from the balance you originally ported over to the card. There it will sit, accruing interest until you pay off every other balance on the card. Is this a deliberate strategy to maximize the amount of fees you have to pay? Yes, it is.

4)    If the new card has a lower limit, your credit rating will drop. The ratio of your outstanding balance on a credit card to its maximum spending limit is known as your debt percentage. This percentage is an important factor in calculating your overall credit score. If you move a $4,000 balance from a card with a $10,000 limit to a balance transfer with an $8,000 limit, your debt percentage will increase from 40% to 50%. As a result, your credit score will drop. Simple, no?

There are a lot of things to be said about balance transfer cards, but very few of them are complimentary. If you’re struggling with your credit card balance, a better solution is to call a free debt hotline to set up a consultation. Even the largest balances can be paid off over time, but only if you do it correctly – and that means listening to an expert, not a credit card company.

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