Many of us have grown so accustomed to getting 0% credit card offers in the mail that we’ve grown to take them for granted. Now that these offers have all but disappeared, the Internet has taken up the slack. At present, it is still possible to find 0% credit card offers, albeit for shorter durations and, for balance transfers, with higher fees.
Unfortunately, the new credit card law designed to protect consumers may lead to a number of unintended negative consequences that are likely to hurt consumers with good credit. Chief among these is an end to 0% credit card deals, especially those lasting more than three to six months.
For the past five years, the standard 0% credit card offer provided a full year grace period on both new purchases and balance transfers. During 2007 and early 2008, a number of credit card companies even offered 0% rates for 15 months. At that time, credit card companies were fighting each other to expand their client base and 0% credit card offers were a major weapon in that war.
Today, the war is over. And the end of this war is not a good thing. Not only are credit card companies no longer seeking out new customers, they no longer want their current customers. (See the credit card complaints section of this blog to see just how little credit card companies care about their customers.)
Given the drastic changes that continue to take place in the credit card industry, it is truly just a matter of time before 0% credit cards get replaced with 5% introductory rates. And long term interest rates. They’re likely to rise as well. Ultimately, however, it is difficult to predict exactly what any given credit card company will do to your account in the next few months. And this uncertainty is cause for concern.
First, consumers who carry balances should act quickly to take advantage of a 0% balance transfer. Credit card companies have already raised balance transfer fees substantially, and many are shortening the duration of 0% introductory periods from one year to 6 months.
Second, consumers who only have one or two credit cards should get new credit cards from other companies as a safety net. Getting a new 0% credit card, or even one with a low interest rate, might not seem important right now. But if one of your current credit card companies cuts off your credit limit or doubles you interest rate, you may find yourself with a lower credit score and few options to get a better credit card deal.
Over the course of the last few months, I’ve heard more consumer complaints than I had in the preceding five years. And the complaints that come in today are different than the ones from the past. Before, consumers often complained because they were tripped up by a clause in the fine print they failed to read. Today, consumers are complaining because they are losing credit, paying higher interest rates, or being forced to close their accounts.
Given the uncertainty in the credit markets, getting a new 0% credit card today is not only a good way to save money on interest. It is also a good way to defend yourself against credit card companies that have the ability to cripple consumers with rate increases and credit limit cuts that can hurt your wallet and your credit score dramatically.
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June 15th, 2009 at 5:03 pm
I recently got a Citi Platinum Select card.
How do I check to see if I can do a balance transfer? My total balance on card I want to transfer is 7660.00. Would I do better to just try to transfer part of that?
Thanks
June 16th, 2009 at 11:27 am
Depending on the offer you received, you can call Citibank to request a balance transfer. The amount you transfer should be less than your total available credit. Hopefully, your credit line is sufficent for the balance transfer you wish to make. If it is not, you may want to consider another balance transfer credit card to make up the difference. Unfortunately, this is easier said than done given the current reluctance of banks to lend to anyone at low rates.