See if you can spot the gimmick in this credit card promo

[kranky]

It sounds really good. Can you figure out why it's not as good as it sounds?

I got a credit card solicitation today from Discover. It features a 0% APR on all purchases until October 2003. But wait, there's more...

"Finally! 0% APR for LIFE on Transferred Balances. You could save hundreds when you transfer higher-rate balances to our unbeatable 0% APR. With this offer you have the opportunity to extend your 0% APR beyond the expiration date of October 2003 for up to the life of the transferred balances. Just make at least two purchases or cash transactions each billing period. Simply use the enclosed coupon and there are no transaction fees with this offer!"

What sounds reallly appealing to me is to apply for the card, hope to get a $10,000 (or more) limit, transfer the full $10,000 to my MasterCard, and enjoy a free loan of $10,000 for as long as I feel like dragging it out. See, I don't owe anything on my MasterCard. So if I transfer $10,000 to my MasterCard, I will have a credit balance and would just ask for a refund. An interest-free loan!

All I have to do is make two purchases each billing period. Oh, and if I'm late with a payment, all introductory rates terminate immediately, so I have to make sure I pay on time.

So what is the catch? I'll give you a hint, it was buried in the fine print on the back of the application.

 

[Mill]

Well I don't have the application so there is no way I can guess.

 

[wfbberzerker]

i thought it said "see if you can spot the gimmick in this credit card porno"

 

[BeeVo]

I used to work for Discover Card doing balance transfers and I don't even know what you are getting at.

 

[Thegonagle]

What's the annual fee?

 

[tm37]

Originally posted by: Millennium
Well I don't have the application so there is no way I can guess.

 

[yoda291]

no more than x dollars transferable?

 

[crypticlogin]

Let me guess: any payments you make will apply to the transferred balance first with the rest (if any) going to paying off any purchases? In the mean time, those purchases have some highriding interest rates. So the 0% APR on transferred balances sounds goodb but at the same time, you're racking up more debt.

 

[fr]

I'll give it a shot. It has something to do with those two purchases or cash advances each month right? Do they charge some outrageous interest rate on those? Is the minimum purchase/advance huge? I'm sure you can't pay off those balances until you pay off your transferred balance.

 

[kranky]

Bad thread title. I should have said "Can you guess" instead, but tenchim got it anyway!

What they mentioned in the fine print is pretty common with these types of offers. It says "Payment Allocation: We apply payments to balances with low introductory/special APRs (such as special balance transfer and purchase APRs) prior to balances with standard APRs."

The impact of that is my two purchases per billing period will rack up interest until my 0% APR for life transfer is paid in full. I guess I could see if someone would let me charge a pack of gum a couple times a month on a Discover card, but that might be tough. Basically, while I'm enjoying my 0% APR for life balance transfer, I have no choice but to pay interest on the two transactions a month. That's probably not a real smart move, unless someone would be so completely disciplined to make sure they used the card exactly twice per billing period, for the smallest transactions they can get someone to allow, and never used it any other time.

 

[yoda291]

the smallest I've ever charged to a card was a cup of coffee...and I had to leave like a 4 dollar tip too

 

[catnap1972]

Originally posted by: kranky
Bad thread title. I should have said "Can you guess" instead, but tenchim got it anyway!

What they mentioned in the fine print is pretty common with these types of offers. It says "Payment Allocation: We apply payments to balances with low introductory/special APRs (such as special balance transfer and purchase APRs) prior to balances with standard APRs."

The impact of that is my two purchases per billing period will rack up interest until my 0% APR for life transfer is paid in full. I guess I could see if someone would let me charge a pack of gum a couple times a month on a Discover card, but that might be tough.

Why would it be tough? Most stores around here couldn't care less how little you put on the card. From my calculations, it'd be a penny or two in interest a month on two .50 purchases...a small price to pay to use the bank's money for an extended period.

(EDIT: was there any minimum stated in the terms that you'd have to spend on those two purchases?)