Another Big Change Is In The Structure Of The Balance Transfer Fee

Category: Finance, Credit.

There s been a lot of press lately about the demise of balance transfer credit cards. Balance transfer cards have changed considerably, but they re far from gone and not likely to be going anywhere anytime soon.

The reports of their death, to use an old quote, have been greatly exaggerated. If you ve been considering cutting your interest payments by transferring the balances to one with a special balance transfer deal, here s what s going on in the world of balance transfer credit cards. But with the numbers of cards in circulation rising and the average Brit carrying four different cards in his or her wallet, they ve had to get competitive with each other. For years, credit card companies were able to build their business by enticing new customers from the ranks of those who d never held plastic before. Thus was born the marketing tactic of offering 0% interest for any balance transferred from a competitor s card to a new card. They missed a vital point in their calculations- customers who switch cards for a better rate of interest have already given up brand loyalty in the interest of getting the best deal.

Those 0% balance transfer deals were greeted enthusiastically by the public- a bit more enthusiastically than the issuers of those cards expected. When the 0% interest ran out, they simply moved their remaining balances to another card. Some of those restrictions are openly stated and easy to see- reductions in time on the introductory rate, for example. To counter that, the big companies started modifying their offers with restrictions designed to keep people from jumping from card to card following the best rate. Others are hidden in the conditions and terms of your credit agreement. It s still worth your while to check on the newest balance transfer offers a couple of times a year, say the money experts, but be sure to compare the offers before you jump from one card to the next. Those traps make it all the more important to carefully compare balance transfer credit cards before you move your carried balance from one card to another.

Comparison sites make it easy to find all the newest and best balance transfer deals and compare them with each other. There are very few 0% balance transfer card deals left, but there are a few. When you check into the offers you find, read the terms and conditions of each balance transfer option for the following things: - What is the APR on your transferred balance and how long does it last? The 0% APR on transferred balances may last for three months, nine months, six months, or in some cases for the life of the balance transfer amount. Many of the new balance transfer offers require that you use your credit card to make a certain number of purchases per month. More often, the APR on your transferred balance will be a low 1- 2% for the life of the balance, as long as you conform to certain restrictions. - What is the APR on new purchases?

This is because the lowest interest rate only applies to your transferred balance. In addition, any payments that you make will be applied to your transferred balance until it s paid off. Any new purchases will be subject to a higher interest rate more in line with typical APRs on other credit cards. That means that your new purchases will sit on your card accruing interest at a higher rate until your entire transferred balance is paid down. - What are the requirements to keep your low balance transfer APR? In some cases, the card agreement will specify a number of purchases without specifying an amount. Most cards no require you to make at least some purchases each month to keep the APR on your transferred balance. In others, it will specify an amount that must be charged against your card, and in some cases, it will be both a number and an amount.

Another big change is in the structure of the balance transfer fee. Remember that those amounts will accrue interest until the balance transfer amount is paid off and choose a card that requires the least amount of new purchase debt. - What s the balance transfer fee? Until recently, most balance transfer options had a cap on the balance transfer fee- a percentage of the transferred balance up to �50, say. Before you choose a balance transfer credit card, be certain that the transfer fee doesn t cost you more than the interest that you d pay on your current card. Now many have dropped the cap in favor a straight percentage. Balance transfer credit cards still exist, and will for years to come- but the terms are changing, and will continue to change as the companies plug holes that allow consumers to use them in ways they didn t anticipate.

Keep your eyes open for new balance transfer opportunities, but be sure to check them carefully for conditions and traps.

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