No. of Recommendations: 6

my apologies if something like this has been previously posted....

You know the ole' game: You receive an "offer" in the mail or from a CS rep to transfer a balance at a "low" rate of x%. And hey, it's so good that they'll only charge you a fee ONCE of, say, 3%.

So anyway, I'm on the phone with my good friend Trish at 1stUSA ( where customers always come first ) and she gives me the pitch- 5 months, 3.9%apr, 3%fee.

Now right off, I can figure in my head that this is actually about 10 or 11%. However, just for amusement, I stay on with her:

"So", I says, "it's really more like 10 or 11% including the fee, right?". "No, the fee is only a one time charge....", she says. "I meant including the fee," I say, " the a.p.r. is actually around 10 or 11." ......"No, your a.p.r. is 3.9%...."

And round and round and round she went, spinning endlessly in a circle of 3 and 3.9 percents ( I don't think she was getting dizzy, because she had obviously ridden this merry-go-round several times before ). So, having had my fun, I thanked her and politely said good-bye.


Like I said above, the real rate isn't too hard to figure out in your head. Just take the number of months the offer lasts and divide 12 by that number ( 3mos.- 12/5= 2.4 ). Multiply this by the fee ( 3%*2.4= 7.2) and add that to the "a.p.r." ( 7.2 + 3.9 = 11.1 ) for the real rate. It's pretty easy once you do it a few times ( and easier when the number of months divides into 12 evenly- 3,4, or 6 ). Or you can make a little spreadsheet that can crunch the numbers for you if you want ( just so you can tease those c.s. reps with the actual numbers when you call ) :

cell A:amount to transfer ( or any number other than zero), say 1000.
cell B: a.p.r of the "offer" (3.9% in ex. above)
cell C: duration in mos. of "offer". ( 5 )
cell D: %fee charged ( 3% )
cell E: $amt. of fee [ A x D ] = $30
cell F: approx. amt of interest [ A x [[B/100]/12] x C ] = $16.25
cell G: total of fee/interest [ E + F ] = $46.25
cell H: REAL a.p.r. [[[12/C] x G] / A ] x 100 = 11.1

I think I have that right...

Or, use the super-easy method: Avoid most any balance transfer offer charging a fee.

So, my 3.9% "offer" was actually 11.1%. Not too good, but at least it was better than one I received from Providian ( pronounced "provide-for-them" ) just the other day: 7.99%(!) until Feb.2000(!!!) (!)... super stupendous. Now since Providian charges a measly 4% fee for their Instant Kash checks, the rate of this amazing,stupendous offer is 31.99% ( I gave them the benefit of the doubt and assumed two whole months of "Savings" )

And So, I hereby present Providian with my personal "Sleazeball CC co. of the Month" award for Dec. 1999
Print the post  

Announcements

UGC Disclosure Notice Regarding Credit Card Posts
Community board discussions about credit cards are not provided or commissioned by banks who may have advertising relationships with The Motley Fool. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.
TMF Credit Center
The Motley Fool Credit Center arms you with real tools and simple messages, that will help you in every credit situation.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.