As expected, average 0% credit card balance transfer fees increased in March from a multi-year low of 2.95% back above the 3% mark to 3.1%. Average 0% balance transfer durations, which had also fallen to a 9 month low of 12 months, rebounded slightly to 12.17 months.
The expected drop in balance transfer fees occurred as a result of the termination of a limited time, 12 month 0% APR no fee balance transfer offer from Discover on February 29th. In the absence of this product, Slate from Chase is presently the only major credit card offering a 0% APR on balance transfers that charges no transaction fees. All other major companies are charging fees of 3% or more on 0% transfers.
Average Balance Transfer Fees Normalizing
Although common prior to the credit crisis, no fee balance transfer offers have been a rarity over the past three years. Consequently, the presence of two such offers on the SBT index in February served to bring average fees to a temporary multi-year low that is unlikely to be repeated in the near future absent any major change in the current stance most issuers have taken towards these fees.
Additionally, the only remaining no fee offer from Chase is also labeled a limited time promotion and it is therefore highly likely that average balance transfer fees will hoover around the 3% level for the foreseeable future. This is typically a non-issue for consumers who obtain balance transfer cards with 0% rates of 12 month or more, but fees of 3% can eradicate most of the value on short duration balance transfers.
The following chart details average transfer fees since September of 2010.
Average 0% Balance Transfer Lengths Stable, but on Shaky Ground
While average 0% balance transfer lengths have been hoovering around the 12 month mark since late 2010, this average has been propped up by exceptionally long Citi balance transfer offers that had lasted 21 months for the past year. In February, Citibank decreased these introductory periods to 18 months on key products including the Citi Simplicity and Citi Diamond Preferred cards. This could signal a trend towards shorter introductory periods, as banks have a tendency to reduce the competitiveness of offers in tandem.
Apart from Citibank, Discover also offers an 18 month balance transfer card as well as a handful of 15 month balance transfer offers. These cards, along with Slate from Chase, are the key reason average balance transfer lengths remain above 12 months as banks like Wells Fargo, Barclays and U.S. Bank all continue to offer lackluster promotions lasting a mere six to nine months.
The following chart details average transfer durations since September of 2010.
The Direction of the Balance Transfer Market
At the start of 2011, credit card companies were ramping up promotions on all types of credit cards. Credit card reward sign up bonuses were expanding exponentially and 0% interest promotions were becoming more aggressive as well. Today, it appears as if the opposite is occurring, with banks pulling back promotional deals and perhaps tightening approval criteria as well. The latter tightening, perhaps more than changes in offer quality, may be the largest cause of concern for people, as it may become increasingly difficult to get approved for increasingly less generous balance transfer promotions.