This is a warning about some of the Interest Free Bank Loans and attractive sounding Bank Credit Cards, because nothing comes without a catch.

At the end of October last year, I was having a Cash Flow problem, and I got a letter through the mail from Bank Of America about Interest Free Loans.  So I decided to investigate.

They provided me with a loan with a small “up front” cost, the amount being paid into my Checking Account and the balance of the loan transferred onto my Visa Card with the Bank.  The terms were no interest until October 2009, but of course I had to make the minimum payments every month, and did of course do this.

I went to England over Christmas, and while I was there I used my Credit Cards three times, my Capital One MasterCard twice and my Bank Of America Visa once.  Imagine my surprise when I get back to find that not only did the Bank Of America charge a higher Exchange Rate than Capital One, they also added a Foreign Transaction Fee of $4.23.

Well as you can guess I was miffed, since I try to use the best card all the time, usually trying to maximise my rewards, like Cash Back and such.  I avoid paying Bank Charges unless it’s absolutely inevitable.

The big shock came with my February Credit Card Statement though.   The previous month I had payed off a large chunk of my loan, as the end of February I had already set up a transfer to pay off another large chunk, my goal being to pay it off in about four months, since my cash flow problem was now over.   Imagine my surprise to find a Finance Charge of $0.89 on the statement.

When I called the Bank, it seems that these Foreign Transaction Fees are set to be the last thing that gets paid off, so until such time as I had completely paid off my Loan, these charges were going to continue to add up.   There was no way that the Bank were going to reverse the charge, so I immediately changed my repayment on the Loan to be the same day, and also paid it off in full.   “Screw them” I thought, as I loath paying Bank Charges.

The moral here is not so much the cost to myself, which in the end was just the Foreign Transaction Fee of $4.23 plus the Interest of $0.89, BUT what if you were in a similar position, had used your card more extensively, and did not have the funds to be able to pay off your loan for the next year?   Those Finance Charges could really add up!

So Buyer Beware, there is often a catch when someone gives you something for FREE.   With the current economic woes in the USA and the need to borrow money increasing, just watch out for deals that sound too good to be true.  There is often a catch.