While many credit card companies have been reducing the length of 0% balance transfer offers and increasing balance transfer fees, good balance transfer deals still exist. The problem, unfortunately, is getting approved. A year ago, credit card companies were significantly more generous when it came time to extend credit lines. Today, consumers with good credit may find themselves getting the cold shoulder when looking to transfer a balance. Here are a few tips to help navigate today’s credit card landscape:
1.) Check your credit: Many people who had good and even excellent credit may have experienced credit score drops due to the closing of credit card accounts or the reduction of credit limits. For example, a person who had a $10,000 credit limit and a $4,000 balance who suffered a 50% credit limit decrease will have likely sustained a pretty hefty decrease in their credit score. This is because of credit utilization ratios, which influence 30% of credit scores. If you fall into this category, use a free credit report and score service before applying for a new credit card.
2.) Apply online, but transfer balances offline: Credit card companies make it easy to transfer balances online. However, many credit card companies don’t want your transferred balance. Thus, when you apply online and elect to transfer balances with your application, you may lead a bank to decline your application or provide a lower credit limit.
3.) Get the longest 0% balance transfer deal: Given everything that has happened in the past year, the very fact that it is still possible to get a 0% balance transfer for 1 year is a bit of a miracle. And finding such a deal is not that easy. In fact, the average length of balance transfer deals is 6 months, half of what it was a year ago. In all likelihood, 6 month balance transfer deals will be the norm going forward, so if you have the opportunity to lock in a 0% for a year, do it now.
4.) Pay the fees: A year ago, most companies capped balance transfer fees at the greater of 3% or $75. During the past year, the $75 maximum has been eliminated by nearly all companies and balance transfer fees have risen to 4 or 5%. However, if a 5% fee is the price one must pay to get a 0% rate for a year, most consumers should pay this fee with a smile. Considering that average credit card interest rates are 15%, paying 5% in fees and getting a 0% for 1 year will reduce interest expenses by 66%.
Final Thoughts: Many people successfully gamed the balance transfer options available in the past five years and avoided paying interest on credit card debt. Unfortunately, the free balance transfer game is nearing its end. Thus, while very good deals still exist, its more important than ever to act on these deals before the banks decide they are too generous.
October 20th, 2009 at 10:47 pm
as a BT novice just discovering your website i am hopeful my mistakes will not bring too much harm.. very helpful info and i will be back..gt
October 21st, 2009 at 9:41 am
Thanks Greg. If you or any other reader have questions, please feel free to contact Smart Balance Transfers. Our mission is to provide our visitors with information to help them minimize the cost of getting out of credit card debt via the use of balance transfers and we take great pleasure in helping as many visitors as we can.