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Fine print on credit card offers full off booby traps

A credit card company offers to let you transfer your balance from another card and pay a financing charge of zero percent until January 2004. It seems too good to be true. Is there a catch?

Lots of people with good credit histories are getting these offers, which can work out well _ if you're very careful about following the rules.

That's easier said than done. Obviously, the card companies don't make any money at zero percent, so the fine print is full of booby traps. Snag one of the trip wires and you could get stuck with a sky-high interest rate that could be very hard to escape.

Why is there such a proliferation of these deals? First, because interest rates are very low. Card companies can, in effect, borrow at extremely low rates to obtain the money they lend to card users. So it doesn't cost them very much to carry you for free for months.

Second, they hope to lure you from their competitors. After the zero percent deal ends, the card company can start making money on your new charges.

Finally, experience has proven that many people who are drawn in by zero percent deals end up paying much more, long before that too-good-to-be-true introductory offer ends.

The first thing to do when you are offered a no-interest deal is to make sure the company will really give you the terms it has described. There's a good chance the offer was sent by a marketing department that didn't have up-to-date information on your account. Even a small blemish, such as having been a few days late on a recent payment, can void the offer. If you make a big balance transfer without knowing this, you could be locking yourself in to a high finance charge.

If the offer comes from a card company you already have an account with, be sure to pay off any previous balance before making the transfer. Look deep in the fine print and you'll probably learn that the old debt will continue to accrue finance charges at the rate you've been paying.

This is especially bad because any payments you make after the transfer will apply only to the zero percent portion of your debt until that is paid off. The previous debt will continue to build up charges of 15 percent, 18 percent, 20 percent _ whatever you've been paying. Because your payments won't apply to this, you'll end up paying interest on interest.

The same rule generally applies to new charges. Use the card for a purchase that is not covered by the zero percent deal and you'll starting paying the regular finance charge on that new debt. You won't be able to get rid of that balance, or those charges, until you've paid off the interest-free portion of your balance.

You may have old balances, or new ones, that are very small, so that the finance charges don't concern you very much. But be very careful to make required monthly payments on time, or you will tumble into default and have to pay finances charges on the zero percent balance as well.

You also must be careful to pay off the zero percent balance in full before the term of that offer ends. Miss the deadline, and any unpaid portion will be subject to finance charges. In many cases, the finance charge will be calculated not from the deadline date but from the date on which you originally made the balance transfer. In other words, you could get stuck with 10 or 11 months of finance charges on a transfer made in February and not paid off by the deadline the following January.

Also look for transaction fees that apply to the transfer. They could be something like 3 percent of the transferred amount, up to a maximum of, say, $50.

So the basic rules for safely using one of these deals are:

Pay off all previous balances before making the transfer.

After the transfer, don't use the card for new charges until you have paid off the transferred amount.

Pay off the entire balance by the deadline.

To be safe, before making the transfer, call the toll-free number on the card to make sure you'll get the deal offered and that you have been credited for the payments you made to clear away previous balances.

The big hazard, of course, is that the no-interest deal will give you so much peace of mind you will continue racking up debts on your other cards. Because those will accrue finance charges, you're likely to make those payments a top priority and find yourself strapped as the payoff deadline on the zero percent deal approaches.

_ Philadelphia Inquirer