0% interest? Banks wouldn’t lie

For months now Bank of America has been advertising credit card balance transfers at a 0% interest rate for a year. What may be technically true is nonetheless misleading. This is because Bank of America will instantly charge you 3% interest on the amount you transfer. Its rationale is that this 3% charge is still much less than the exorbitant double-digit rates they and other banks may be currently charging you. Which is a nice scheme when you think about it. Overcharge and then get a no-default guarantee infusion of cash. Twelve months later, boom, right back up to the exorbitant rate. This is being done during a time when banks can borow money for just .75%.

The best way to avoid the need for a balance transfer is obviously to not have a balance in the first place. The second best way is to tap into the equity of your home with a new mortgage that provides cash to you. The beauty of this is twofold. First, you will be paying an historically low interest rate and not the exorbitant credit card rate. Second, all the interest you pay on that mortgage is likely deductible. This means your tax bill decreases.

Meanwhile, if you don’t have a credit card balance, actually have some cash and want to invest it with Bank of America, guess what rate you’ll receive from them for your CD? Less than .1%. That’s less than a tenth of a percent. And some of these banks still needed to be bailed out.

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