As I’ve been reporting for the past seven months, credit card companies are growing increasingly unwilling to offer 0% balance transfers to even the most creditworthy consumers. Despite the fact that many people need balance transfers more than they ever have in the past, the combination of the credit crunch and new credit card legislation have spelled nothing but bad news for balance transfers.
Yesterday, during their second quarter earnings call, JP Morgan Chase discussed various ways in which the new credit card laws will impact they way they do business. And one area mentioned was a move away from not only 0%, but all low rate balance transfer deals.
Chase took steps to discourage consumers from transferring balances earlier this month by raising fees on balance transfers to an industry high 5%. But now, like Discover, they are going on the record to dispel any hopes consumers might be holding for a return to the boom years of 0% balance transfers.
Ultimately, these transactions will continue to exist with significantly less generous terms. 0% rates may be replaced with 5% rates. Balance transfer fees will remain elevated. And consumers with high credit card balances are likely to be shunned or denied when they attempt to transfer balances.
With the new CARD act scheduled to take effect in February, the next six months should be filled with the painful rate increases and credit limit cuts that will be curtailed by the new laws. In the meantime, credit card offers will carry higher interest rates, lower credit limits, and shorter 0% periods, if they provide 0% rates at all.
Once February arrives, credit card companies will spend months, if not years trying to make their businesses profitable again. Chase, for one, did not foresee making a profit in credit cards in either 2009 or 2010. And, without the massive profits this business once generated, consumers are likely to find a climate that is not only bad for balance transfers, but for all credit card transactions.
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August 19th, 2009 at 7:50 am
Beware of Chase when it comes to balance transfers. They use a “bait and switch” tactic in that they lure you with the offers. Once you transfer your high interest balances they will increase your minimum monthly payment to an unreasonable amount. Mine went from $262 to over $700 per month. I have repeatedly called customer service and spoke to supervisors who just state “you have no options”. Apparently they want customers to default rather than work with people to come to agreeable payment terms. Chase is causing catastrophic devastation to many many once stable consumers. The saddest part is that I have written to my congressmen, senators, FTC, and so on and NO ONE CARES!
August 19th, 2009 at 9:52 am
Barb,
You touch on an issue the new credit card laws don’t that has been devastating to many people this year. While the credit card companies won’t be able to lift rates at leisure, they can still increase monthly payment percentages at will. The combination of rate and minimum payment increases hurt many people over the past few months, and for many, the payment percentage was the biggest problem, as 200-300% monthly payment increases really pushed good, honest customers over the edge.
August 23rd, 2009 at 9:49 pm
I have superior credit and was lured in by Chase’s offer of the “until balance is paid off” 4.99% rate. Request a copy of your ORIGINAL agreement and the most recent new card – they are doing this to people that have low fixed rates and aren’t making any money on them so they figure we will default on the card and then they can get us at 24 or 33% I suggest everyone file a complaint with their attorney general. This is deceptive business practices