Consumers looking to save money with 0% balance transfers are likely to find it significantly more difficult to gain approval today than at any other time in recent history. According to a Federal Reserve survey of senior loan officers, more than 60% of banks are tightening lending standards. Two years ago, the number of banks doing so was less than 10%. During the past decade, with a brief exception during 2000-2002, 10% or less was the average. (Even during the 2000-2002 period, only about 20% of senior loan officers reported tightening of credit standards.)
The tightening of lending standards effects everyone, but is particularly troublesome for people looking to take control of their finances via the use of tools like 0% interest balance transfers. With banks unwilling to lend, consumers will find themselves fighting high interest rates as they attempt to pay down credit card debt. For the majority of this decade, this was not an issue, as banks were giving 0% interest rates to household pets.
If anything positive can be gleaned from this report, its that there isn’t much more room for credit tightening. However, the second bailout and perhaps pressure from the government to get credit flowing may ease this situation. In the meantime, consumers should be vigilantly working to reduce debt, and thus monthly interest expenses. And, for those who can get approved, transferring balances to a 0% credit card is still the way to go. Hopefully, this option will be available to more consumers in the coming weeks or months.
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