Reading the Fine Print

I recently received a flyer from Navy Federal Credit Union advertising a good balance transfer deal from a organization who I trust and with whom I enjoy doing business.

The details of Navy Federal's deal are:

  1. No balance transfer fee.

  2. Low, fixed 6.9% APR

Sounds fantastic, doesn't it?  It is a pretty good deal.  Let's look further and check out the fine print.

"Offer expires March 31, 2009.  The 6.9% fixed APR will apply to the balance transferred until January 1, 2010.  After that period, the standard APR will apply to any unpaid portion of the balance transferred.  Rates for purchases, convenience checks and cash advances range from 7.9% APR to 18% APR.  Balance transfers are processed as cash advances (finance charges accrue from the date the balance transfer is posted to the account, standard rate applies.) …Offer valid for balances transferred from other institutions.  Maximum total transfer amount is limited to your approved credit line and cannot exceed $30,000.  Balance transfers using convenience checks will be subject to the cash advance rate.  Rates are based on an evaluation of credit history, so your rate may differ.  Subject to credit approval.  No reward points with this offer.  This offer does not include Navy Federal business credit cards.  Offer can end at any time without prior notice."

So, what does all the small print mean?  Let's break it down:

"The 6.9% fixed APR will apply to the balance transferred until January
1, 2010.  After that period, the standard APR will apply to any unpaid
portion of the balance transferred. "

What this means is that if you transfer a balance and don't pay it all off by January 1st of next year (which is a holiday, so basically we're looking at December 31st), then your interest rate will change back to the regular interest rate.  If you transferred a balance this week, you'd have about 10 months of the promotional rate before you'd be back to your regular NFCU rate.

"Rates for purchases, convenience checks and cash advances range from 7.9% APR to 18% APR."

This means that there are a variety of regular interest rates offered by NFCU.  You'll need to check your account to find out your regular rate.  If you log into your NFCU account online, and click on your credit card account, your current APR is listed at the bottom of the top blue section (though the interest rate itself is written in black.)  It will say "Effective Annual Percentage Rate" and then it will have a number, like 9.9%.

"Balance transfers are processed as cash advances (finance charges
accrue from the date the balance transfer is posted to the account,
standard rate applies.)"

So, when you do a balance transfer, NFCU will begin charging interest on the balance transfer as soon as they process it.  This is different from how the balance on purchases is calculated.  For example, if you have no balance on your credit card, make a purchase and pay it off before the due date for that bill, you won't pay any interest.  With a balance transfer, you could transfer a balance, pay it off in a week, and you would still pay interest.

"Offer valid for balances transferred from other institutions."

You can't move balances around within your NFCU, or even between other people's accounts (like your spouse.)  They do this to make sure that people don't use this offer to lower their interest rate on debt that they already have with NFCU.

"Maximum total transfer amount is limited to your approved credit line and cannot exceed $30,000."

The terms of this offer don't let you exceed your current credit limit with NFCU, and you can't transfer more than $30,000.

"Balance transfers using convenience checks will be subject to the cash advance rate."

You can't use convenience checks to do this balance transfer.  You must contact NFCU to set up the balance transfer directly.  If you use a convenience check to do a balance transfer, then you won't get the promotional rate.

"Rates are based on an evaluation of credit history, so your rate may differ.  Subject to credit approval."

NFCU does not guarantee that you will be able to get this promotional rate.  They may check your credit report.

"No reward points with this offer."

Well, darn.  But I guess that is only fair.  They're not going to give you rewards points for transferring a balance.

"This offer does not include Navy
Federal business credit cards."

Self-explanatory.

"Offer can end at any time without prior
notice."

NFCU can choose to end this offer before March 31st if they want to.

So, what do you think?  Most of these pieces of fine print are standard on credit card offers.  I don't see anything here that would make me think that NFCU is trying to do anything tricky or devious. 

Just to be sure, I gave NFCU a call.  I asked the representative if there were any terms that weren't listed on the flyer, and it turns out that there is a big one:  If you already have a purchase balance on your NFCU credit card, and you transfer a balance to that same card, any payments made will apply to the purchase balance first. Once all purchases have been paid, then your payments will start being applied to your balance transfer.  So, if you have $1,000 on the card today and transfer $500 from another card, you will have a $1,500 total balance.  You could make $1,000 in payments between now and January 1st, bringing your balance down to $500, but all those payments would be made against your higher interest charges, meaning that you'd still have the $500 transferred balance when the rate resets on January 1st.  You can work out the math many different ways, but basically this means that you need to make sure that your regular (non-promotional) rate with NFCU is lower than the rate on the card from which you are transferring a balance.

Still, it looks like a great offer for many people.  I'm not taking advantage of it because I only have a balance with NFCU and USAA.  I can't transfer my NFCU balance and I've got a fanastic interest rate with USAA.  What are some other reasons that I might not take advantage of this offer?  If my regular interest rate with NFCU was high and I didn't plan to pay off my balance by the end of December, if I didn't have enough credit available with NFCU, or if I plan to pay off my other account this month.

While this is a dissection of one particular offer from one particular credit union, you can use the same skills to understand any credit card offer.  Take each sentence individually and figure out what it means.  If you're not sure, call and ask them.  What seems like a fantastic offer might truly be great, or it might be full of little catches that will cost you in the long run.

About the Author

Kate Horrell
Kate Horrell is a military financial coach, mom of four teens, and Navy spouse. She has a background in taxes and mortgage banking, and a trove of experience helping other military families with their money. Follow her on twitter @realKateHorrell.