Normally I encourage people to take up 0% balance transfer offers and I wish I would get more offers myself. However, I must warn you that just because it says 0% that does not mean it is always the best deal for you.

I just got an offer for a 0% balance transfers from one of my better cards….but after reading it carefully I decided to refuse the offer. Here are the terms:

* 0% until 04/09

* 4% balance transfer fee

Now I will talk about WHY I decided not to take the offer after all. First off I thought that I could take the offer and write myself a check and deposit the money in my ING savings account to earn interest. I would put the money in a 3 month CD to get the higher rate but still leave myself the flexibility to get the money out without a penalty, in time to repay the credit card.

Then when the balance transfer period was about to end I could just pay back all the money. This is also known as credit card arbitration, which is how a lot of people made money off their cards in the past.

This situation would not work for me however because ING is not offering any 3 month CDs right now. This means that I would just be getting the regular 2.75% interest rate…which might have been good if not for the balance transfer fee.

I was planning on taking out $3000 on the card, thus making the balance transfer fee come out to $120. At the current rate of 2.75% APY I would be getting about $6 a month on the account in interest for a total of about $27 in interest by the time I needed to pay back the money in full before the interest rate went up.

As you can see, $120 in fees is a lot more than $27 in interest so I would be faced with a loss here. I decided not to take the balance transfer offer and just wait to see what happens.

What would YOU have done? Please let us know in the comments.

Enjoy the New Year and follow along with me as I journey through next year on my way to becoming debt free!!!!!!

If you think I made an error in calculating please let me know as there might be time to change my mind.