Just a few months ago, most credit card companies had cut 0% APR credit card offer durations to as little as 6 months.  However, Citibank recently began offering a 0% APR for 15 months deal on its Citi Platinum card.  Unfortunately, this particular 0% for 15 months offer is not all its cracked up to be.

Like many advertised 0% introductory offers, this credit card advertises a 0% APR for up to 15 months on balance transfers and purchases.  In the fine print, however, one quickly learns that only some applicants will qualify for the 15 month 0% interest rate. 

Many applicants will likely receive a 0% APR for as little as 7 months.  While it is unclear what type of credit score and credit history is needed to attain a 0% for 15 months, the fine print makes it clear that applicants will be broken into three groups.  The first group, presumably those with superior credit, will qualify for the full advertised rate.  However, the second and third group will only get a 0% for 7 months.

Citi is not the only credit card company that advertises the longest available rate and only grants it to people with the highest credit quality.  Many credit card companies currently advertise 0% rates for “up to 12 months,” but may only grant an approved applicant a 0% rate for as little as 6 months. 

The key to getting the longest 0% rate on balance transfers and purchases is to find credit cards that offer 0% rates for a full 12 months to approved applicants.  Not only are these offers more transparent, they’ll also save you from having to apply for multiple credit cards in the event you do not get the best advertised rate.

-Jennifer Davide

For more information on 0% credit cards, please see the main section of Smart Balance Transfers where you can compare credit card offers and apply online for approval.

*Important Disclaimer:  All information is presented as is and without warranty. Information is believed to be accurate as of the date of publication. Because credit card offers change frequently, please see the terms and conditions of any offer before applying.

With congress passing and President Obama signing the CARD act of 2009, provisions of which have been enacted already with the remainder to be implemented in 2010, credit card issuers are preparing for the most sweeping changes to hit the industry in decades. This, along with the uncertainty around consumers’ ability to pay their debts, has credit card companies closely examining their rates and incentives.

During the previous decade, 0% credit card rates were a way to entice customers to open a new credit card and move any higher interest balances to this card. The card companies knew that most consumers would not pay off their balance by the time the initial 0% rate expired, usually not more than 12 months. When the 0% interest rate expired, the credit card issuer would have a customer that was paying a much higher rate on a hefty balance. Also, if at any time during that initial 0% phase a card holder was late, the rate could be increased. Well, much of that is changing when the new law is fully implemented.

Credit card issuers will have much less flexibility in when and by how much they can increase the rates on introductory or “teaser” programs under the new rules. Payment due dates and time to pay rules are changing also, making it less likely for consumers to inadvertently miss a payment and have their rates increased. In addition, rates that are increased due to late payments must be returned to the prior interest rate if the borrower makes on-time payments for six months.

While these changes are a benefit to credit card holders, the card issuers will be missing out on potentially billions of dollars in lost fees, penalties and rate increases. Because of this, the future of the 0% credit card is in jeopardy. Card issuers must look at the cost of issuing these 0% rates and weigh that against the revenue they will no longer be collecting. The fiscal models that the credit card companies have used for the past decade and more are being challenged and the loser is likely to be the 0% credit card – and the consumers who benefitted from them.

-Jeffrey Weber

1.)  0% Interest on Purchases:  Credit card companies use 0% interest rates on purchases to lure in new customers who will use their cards, spend (and earn then fees every time you use the card) and then carry a balance once the 0% interest period expires.  This allows them to earn money when you spend and, eventually, what you do not repay during the 0% period.  For a while, the length of 0% introductory periods ballooned to as much as 15 months.  However, during most of the past five years, the average 0% rate lasted about 12 months.  Today, more and more credit card companies are reducing the length of these rates to the legally mandated minimum of 6 months.  Some companies still do offer 0% interest rates on purchases for up to 1 year, but these offers are the exception, not the rule.  (You can view current 0% credit card offers here and apply online.)

2.)  0% Interest on Balance Transfers:  Getting a 0% interest rate for 12 months on balance transfers has literally helped over 20,000 visitors of Smart Balance Transfers save money on interest during the past two years.  Getting a 0% interest rate for a full year can save a person with an average interest rate of 15% save a little over $100 for every $1000 in transfers over the course of a year.  A person with a $5,000 credit card balance who does a balance transfer can save around $500 with a 0% interest rate for a year.

Unfortunately, many companies are reducing the length of 0% balance transfer offers to 6 months, which sharply reduces the money that can be saved, especially once balance transfer fees are taken into consideration.  Fortunately, a few 0% for 1 year balance transfer offers still exist.  Hopefully, these offers will not disappear in February when the new credit card laws are fully enacted.  However, anyone who could benefit from a year without interest should seriously consider applying for a balance transfer credit card and doing a balance transfer before February just in case the banks choose to get stingier.  (For more information on current 0% interest balance transfers for 12 months, please see the appropriate section of this website so you can compare offers and apply online.)

Final Thoughts:  If you’ve followed the balance transfers blog during the credit crunch, you’re already aware of my concerns about the future of 0% interest rates.  During the easy money decade we are about to exit, 0% interest rate offers were everywhere from our mailboxes to the television.  However, when was the last time you got a 0% credit card offer in the mail?  And, if you did get one, where are the other five that usually showed up in the mailbox alongside it.

Banks are likely to continue to be tight with credit card lending and this may mean less 0% interest options in 2010 and beyond.  All the more reason to lock in a 0% interest rate for 12 months today while such offers still exist. 

Here are a few leading offers you can compare:

How Balance Transfers Work:  If you are not familiar with balance transfers, this section will cover the very basics.  Essentially, a balance transfer transaction involves moving the debt from a high interest card to one with a low introductory rate that is usually 0% for 6 months to 1 year.  During this period, you pay no interest on your credit card debt, which allows you to pay down your principle quicker. 

For example, a person with a 15% interest rate would pay about $100 a month in interest.  With a 0% rate, that $100 wasted on interest instead pays down your credit card debt.  Thus, if you continued to pay the same monthly amount on your credit card during the 0% period, you avoid $1200 in interest and reduce your $8000 balance to $6800.  If you typically pay $300 a month, you could reduce an $8000 balance almost in half during one year.  Without a 0% balance transfer, a $300 monthly payment would only reduce your debt by about 25%.

Choosing a Balance Transfer Credit Card:  Okay, you decided you want to save $1,000 this year and have a plan to start paying down your credit card debt.  The next step is finding the right credit card.  As a result of the credit crunch, most credit card companies have shortened the length of balance transfer offers and increased the fees.  A year ago, most credit card companies offered 0% rates that lasted a full year.  Today, most offer 0% rates for 6 months.  However, it is still possible to get a credit card that offers a 0% APR on balance transfers for 1 year.  Unfortunately, you will likely have to pay a 3-5% balance transfer fee. 

In the past it was possible to avoid balance transfer fees, but today, they are a basic cost of doing business.  And, while they may seem steep, consider the balance transfer fee as your interest rate.  If you are currently paying 15% interest and you switch to a 0% balance transfer card with a 5% balance transfer fee, you’re paying 67% less in interest and fees than you would without the balance transfer. 

Using the example of a person whose credit card has a 15% rate and an $8,000 balance, a 0% for 1 year transfer with a 5% fee will cost $400, but save close to $1200 in interest.  This is a net savings of $800.  I hardly think a 5% fee is a good reason to choose not to save $800.

Applying for a Balance Transfer Credit Card:  Once you’ve found a credit card that offers a 0% rate for a full year on balance transfers, the next step is to apply online.  When you apply online, do not transfer balances with your application.  Why?  Wait until your card arrives in the mail so you can review the complete terms and conditions, long term interest rate, and credit limit.  Some companies advertise a 0% APR for up to 12 months and allow customers to transfer balances online, but may approve applicants for a mere 6 months.  If you transfer balances online, you may not find out your 0% rate only lasts six months until too late.  Thus it is better to be safe than sorry.

Overall, balance transfers are a great way for anyone with credit card debt to reduce monthly interest expenses and pay down debt faster.  Without massive interest expenses, your monthly payment will go far in reducing your debt.  And, with the smart use of multiple balance transfers over the course of two or three years, you can be credit card debt free in a fraction of the time it might take without Smart Balance Transfers.

For more information or to compare and apply for a balance transfer credit card, please use the navigation to your left to compare offers in the main section of Smart Balance Transfers.

On the average, consumers looking to get a 0% credit card in time for the holidays should allow at least 10 business days for their card to arrive in the mail.  This unfortunately means that a person who applies for a credit card today is unlikely to get the plastic in hand until the beginning of December.  In a best case scenario.

Longer processing times for credit card applications are arising as more lenders inject a human element into the credit card approval process.  In the past, most applications were examined using a computer program that spit out approval after approval.  Today, more credit card companies are using real people, a change which may add to the time it takes to analyze and accept (or deny) a credit card application.

Ultimately, the best thing way to get a new 0% credit card for the holidays is to apply as soon as possible.  With Thanksgiving only days away, consumers who wait into the early days of December run the risk of having their credit card show up on December 26th, if at all.

As experienced credit card users may have noticed, there just aren’t that many 0% balance transfer offers available today, and most of them only provide 0% rates for 6 months.  This is not ideal, as these offers now carry higher balance transfer fees ranging from 3-5%.  Gone are the days of 0% for 15 month balance transfers, not to mention no fee balance transfers and fixed APR for life balance transfers.  Today, balance transfer options are relatively limited.

The best balance transfer credit card available today offers a 0% APR for 12 months and charges a balance transfer fee.  While not ideal, this still represents a bargain compared to 0% for 6 month offers-or no balance transfer at all.  The best offer available as of today offers a 0% APR for 12 months and charges a 5% fee.  While the 5% fee would have been unheard of a year ago, this has become more common of late, as less banks are willing to take on new debt without extracting a pound of flesh first.

Fortunately, paying a 5% fee to get a 0% APR is still worthwhile.  A person with a $10,000 balance on a credit card with a 10% APR will likely pay around $1,000 in interest during a year.  With a balance transfer, the total expense is $500 for the balance transfer fee.  At a 15% rate, that same person would save $1,000 in interest, while at a 20% rate, that person would save $1500.  Yes, the savings are less than they were a year ago.  But saving $500 or more on interest and using that money to pay down credit card debt is a good deal no matter how you slice it.

For a while, it looked like balance transfer offers would all but disappear.  And, once new credit card laws take full effect in February, there’s a chance they might.  In the meantime, however, locking in a 0% deal still remains a great way to reduce interest expenses and work on getting out of credit card debt faster.

Original Aritcle:  A little over year ago, I researched the almost mythical 0% balance transfer for life.  Despite the fact this incredible offer seemed to be an impossibility, I ultimately learned that Discover had been offering this deal to select customers via direct mail invitation.  However, the trail of evidence dried up after 2006, and that offer disappeared.  At this time last year, 0% balance transfers for 15 months existed.  Sure, only one such offer remained (down from a half dozen), but getting a 0% APR for 15 months was a possibility.  Such is not the case today.

Unfortunately, I’ve come across some deceptive ads promoting phantom 0% for 15 month balance transfer deals, however, the ads lead to pages with 0% offers lasting 6 months.  On the average, 6 months is the new 12 months, and 0% for 15 months, is the new 0% balance transfer for life.  Things have changed dramatically in the consumer credit world, and 0% offers were one of the first victims. 

At present, the longest 0% balance transfer offers last 12 months, and these offers are few and far between.  However, they still do exist (for more information, see the balance transfer section of this website).  Although getting a 0% for 12 is still possible, you should expect, nay, welcome higher fees, as this has become the new norm as no fee balance transfers and fixed apr balance transfers have also gone the way of the dinosaur.

Whether or not more banks will extend balance transfer offers to 12 months in the near future is a question only time will answer.  As millions of consumers faced massively increased interest rates this spring, summer, and fall, banks not only made it tougher to get approved for new credit cards, but raised long term interest rates and shortened the length of balance transfer promotions.  Recently, introductory rates have gotten longer, but long term interest rates remain high, and are likely to move higher when the Prime Rate, currently at historically low levels, begins to rise, thus triggering the variable element of non-fixed interest rates to increase.

In the interim, the smartest thing consumers carrying credit card debt can do is to take advantage of the longest available 0% balance transfers and focus on paying down debt as quickly as possible.  The days of jumping from one 0% offer to the next have come to an end, and more and more people are opening up their credit card statements to find that a once reasonable interest rate is twice what it once was.

During the past five years, it was entirely possible to use 0% balance transfers year after year to defer interest (and hopefully pay down debt).  However, this is not the case today.  Not only is it getting tougher to get approved for a 0% balance transfer credit card, it is also getting increasingly difficult to get a 0% APR for more than 6 months.  To make matters worse, just about every company has raised the maximum balance transfer fee and many have increase the fee to 4 or 5% of the transaction.

Yes, I still believe 0% balance transfers offer consumers an extremely effective way to reduce interest expenses, especially those who have been slapped with rate increases.  However, the era of endless balance transfers is over and everyone utilizing balance transfer transactions needs to approach their credit card debt as if 0% transfers won’t be there tomorrow.

Given the environment for balance transfers, its easy to see why putting a $17,000 timeshare on a credit card is a terrible idea-the timeshare salesmen should truly be ashamed of themselves for suggesting it.  Hopefully, others who are being told to pay for timeshares with credit cards will stumble upon this article, as relying on massive five figure balance transfers to pay off a purchase such as this is ridiculously dangerous.

Here is the email from Gary that triggered this rant:

“My wife and I purchased timeshare points on Wednesday of this week with Wyndham Vacation Resorts.  We opted for their offer of a $17,000 loan using their low-interest credit card.  Essentially they suggested to start off with one of their \”in-house\” (RCI) low-interest card with an interest rate of 2.9 for 9 months, then switch over to another \”in-house\” Wyndham Rewards card with 0% interest for about 12 months.  After 12 months, switch over again to the other low interest RCI card.  We would continue that back and forth process between RCI and Wyndham until our debt was paid off – probably in 5+ years.

The sales representative assured us that this was a common practice and that we had nothing to worry about as long as we made our payments on time.

Other relevant info:
1.  We have decent annual income – appx $88,000
2.  We do not carry a debt on any other credit cards.  We always pay off the balance in time.
3.  We have two other debts – a 15 year mortgage and a 2 year car loan.

We have never done a transfer loan like this before so my question is whether this type of loan is a good idea?  We don\’t won\’t to get stuck down the road with a very high credit debt and high interest rate.  We have 10 days from Wednesday (July 8th) to back out of the whole deal.  I know that you can\’t guarantee what will happen, but do you think we have made a wise decision or would it probably be better for us to back out of this situation?”

And here is my educated opinion:

“To be frank, this sounds like a terrible strategy and one that has a high likelihood of failure.  In the past, it was possible for consumers with very good credit to bounce between 0% and other low rate credit cards.  However, between the credit crunch and new regulations, this has become quite difficult.  Most banks have cut 0% periods from 1 year to 6 months, and more and more are refusing balance transfers completely.
 
In my opinion, the salespeople are trying to close a deal and show no concern or knowledge of the potential problems their scenario entails.  As I see it, they stand to make money on the sale and on interest from the credit cards.  And it seems like an absurd conflict of interest that they want you to use the RCI card with a 2.9% rate for 9 months before the Wyndham card with a 0% for 12 months.
 
Plus, at the end of the nine months, even if you could be approved for the Wyndham card, there would be a 4% balance transfer fee, so if you paid the balance down to $12,000, that fee alone would cost you $480.
 
I strongly recommend you pull out of any deal that involves credit card financing.  You are truly taking on significant interest risk and it is clear the people you are dealing with do not have your best interests in mind.
 
Please feel free to contact me should you have any further questions.  I’m glad I had this chance to assist.”

I truly hope Gary is able to back out of his contract.  And I also help anyone else being offered this type of ludicrous timeshare financing plan sees this and walks away from the deal.

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.

About the same time, I warned that balance transfer fees would rise.  At that time, most companies were charging a 3% fee with a $75 maximum.  A few weeks later, companies began lifting the $75 maximum, raising the cost on balance transfers in excess of $2500 dramatically.  For example, a person who did a $5,000 balance transfer with a straight 3% fee would have paid $150, or double the previous maximum fee.

Recently, Bank of America announced that they will raise balance transfer fees to 4% on June 1st (my comments on this credit card fee increase appeared in a recent article on the Christian Science Monitor.  Clearly, the direction of balance transfer fees is up.

Just as we’ve been on the money about many balance transfer fee issues, we’ve also been fairly accurate with regard to fixed APR and 0% APR offerings as well.  Fortunately, it is still possible to get a 0% APR for 12 months on balance transfers.  However, the number of these offers has decreased significantly and it is very likely that in a few months, the average 0% rate on balance transfers will be 6 months and still carry a 3% fee. 

While I don’t want to be alarmist, I think anybody who stands to benefit from a 0% balance transfer, which is almost everybody, needs to act soon so they can lock in a 0% APR for a full year.  Otherwise, getting out of credit card debt will become significantly more difficult.

Now, I truly hope to be wrong on this prediction, but failing to take advantage of a balance transfer now may prove a costly bet against my prediction in the long run.

While this change in duration is unfortunate, consumers looking for 0% balance transfers can breathe a sigh of relief, as Discover will continue to offer a 0% APR for a full year on balance transfers to approved applicants.

For more information on Discover credit cards, please see the Discover balance transfer page on our website.

Should you read an older blog entry stating there is a 0% for a full year on purchases, please ignore this.  As always, check and double check the terms and conditions of any credit card you apply for.  While we strive to maintain the most accurate information, discrepancies do occasionally occur.