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Credit Cards

A Catch to Balance Transfer Offers

Watch out for hidden fees and high rates applied to new purchases.

A card that offers a 0% interest rate on balance transfers can be a real boon when you're paying off a big-ticket item or whittling away at a holiday-shopping balance. That's because once you transfer the balance to the new card, additional interest charges are suspended for as many as 15 billing cycles. (Check out the best credit card deals.)

If you've recently received several such offers in your mailbox, read the fine print and choose one that also promises a waiver of the balance-transfer fee. Issuers routinely charge 3% of the amount transferred, with a minimum of $5 to $10.

But think twice before you use your new card to buy a new iPhone. A recent Government Accountability Office study found that the vast majority of card issuers apply your payment to the balance with the lowest interest rate. So, unless your offer also includes a 0% rate on new purchases, your check will be applied to the transferred balance -- and not to the iPhone. Which means that interest charges of 12% to 14% will mount up on the iPhone and any other new purchases you make until you pay off the entire transferred amount.

Bottom line: Even if you get a 0% rate on purchases, it's smart to cut back on spending until your balance is wiped out.

See our tables with the best credit card deals.