What do you think about rate for life?

Question

I hear lots of people have a 3.99 or 5.99 % rate for life. That means you can pay as long as you want until you pay it off. Sounds good, doesn't it? Credit card companies are out there to make money. If you have a card that offers rate for life, they also require you to use it once or twice a month for purchases. This purchase rate is not 3.99 or 5.99% but it would be at 15.99%

When you send in the money, they will allocate the payment to the lower APR before balances with higher APR. That mean the cookies or gas that you just pump will not be paid until the balance you have gets paid first. By the time it all said and done, you paid for that $20 gas will not be $20 but it could be $40.
I don't understand why people would prefer rate for life? Do you?

JJ I guess you didn't read my comment.That additional purchase will not be paid until they paid off the 3.99 first. If they stress that for 5 years, the gas that they bought today won't be $20 in 5 years but it could be $40. I know how it works. I work for a credit card company. I just wonder why people don't see it.

You have no control how credit card allocates your payments. It will pay the lower APRs before balances with higher APRs.

Answer 1

Because they did not read the fine print that you just talked about. They see that they will get the low rate on their balance transfer until it is paid off and don't understand how their payments will be allocated.

The way to make this work is to just meet their minimum purchase amounts. Then make sure to pay off all of the minimum purchase items each month; there should be no interested charged on that portion if it is paid off each month.

Good Luck and keep reading the fine print!

Added Later!
Oops, I see your point now - the balance transfer at 3.99% will be paid off first while the recent purchases (at a higher %) stay on the card until the low interest rate item is paid off.
It comes down to the basic greed of credit card companies and the lack of basic financial skills the public sector to figure out the game. People only see the 3.99% and think that they are getting over on the credit card companies by transferring their balance to a new card every six months. All they are really doing is adding to the floating balance and ruining their credit.
Most of our legislators will not do anything about this because it does not affect them. They are mostly millionaires that have hired CPAs to take care of these things for them. (That and the credit companies and banks are putting a lot of money into the campaign coffers!!!!)