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.

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.

We’ll start with $3000 in debt on a credit card with a 14% interest rate.  Every month, this card racks up $35 in interest.  While this may not seem outrageous, over the course of a year, the total interest expense nears $450.  And that assumes the debt doesn’t go up.

Things start getting uglier when we increase the debt level to $5000.  On a monthly basis, the interest expense crosses the $50 threshold, coming in at $58.  While this isn’t ideal, the yearly cost is really striking:  $746!.  And $5000 is only about half of the average household credit card debtload.

Now, let’s look at the costs of $10,000 in debt.  On a monthly basis, interest expenses cross into triple digits, coming in at just over $100.  What’s frightening, however, is the yearly cost.  It totals over $1,400.  No matter who you ask, that’s a lot of money.  And, its money that doesn’t have to be spent.

Although the credit crunch has made it more difficult for some consumers to get accepted for 0% balance transfers, it is still possible to get approved for one of these money saving deals.  Unfortunately, however, the credit crunch may worsen, and the availability of these offers may dry up quickly.  For those reasons, not to mention the fact you can save a few hundred or thousand dollars, the time to transfer balances to a 0% credit card is now.

You can review these offers in the balance transfers section of this website and apply online.  You can also continue reading for some real nightmare balance transfer scenarios.

Nightmare #1:  $10,000 in credit card debt with a 17% interest rate

• Monthly Interest Expense:  $142
• Yearly Interest Expense:  $1839

Nightmare #2:  $15,000 in credit card debt with a 15% interest rate

• Monthly Interest Expense:  $188
• Yearly Interest Expense:  $2411

Nightmare #3:  $20,000 in credit card debt with a 15% interest rate

• Monthly Interest Expense:  $250
• Yearly Interest Expense:  $3215

These scenarios are not uncommon across America, and with high interest rate credit cards, debt can quickly spiral out of control.  With an interest rate of 14%, debt can double in as little as 3 years.  And, as we all know, its much easier to get into credit card debt than it is to get out.

Our advice is simple:  don’t let your credit card debt get out of control.  Consolidate high interest credit card debt onto a 0% APR balance transfer credit card and pay down your debt before its too late.

Why?  Credit card issuers are being hit with a Perfect Storm.  Both Bank of America (BAC) and Citi (C) announced rising credit card delinquencies in the past few days.  This, of course, cuts into their profits.  However, this shouldn’t have been a surprise to anyone.  What makes this situation particularly dire is the freeze up in commercial lending.  The credit card companies are being forced to pay significantly more to borrow the money they lend to consumers, cutting deeply into their profits. 

Without a sharp and immediate decrease in the cost of borrowing money for banks, consumers can expect to see higher interest rates and the quick elimination of 0% APR offers.  If the credit crunch continues to worsen, the concept of a 0% APR may soon be little more than a memory.

Smart Balance Transfers has been sounding the alarm for quite a while now.  Consumers paying double digit interest rates on their credit card debt may want to start listening.  If you don’t lock in a 0% APR now, you may not be able to find one soon.

To learn more about available 0% APR credit cards, please see the credit card offer section of this website.

According to the bill, the Credit CardHolders’ Bill of Rights would do the following:

• Protect cardholders against arbitrary interest rate increases
• Prevent cardholders who pay on time from being unfairly penalized 
• Protect cardholders from due date gimmicks
• Shield cardholders from misleading terms 
• Empower cardholders to set limits on their credit
• Require card companies to fairly credit and allocate payments 
• Prohibit card companies from imposing excessive fees on cardholders
• Prevent card companies from giving subprime credit cards to people who can’t afford them
• Require Congress to provide better oversight of the credit card industry
• Contain NO rate caps, fee setting, or price controls

Now, its hard to argue with the benefits many of these goals would provide to consumers.  Unfortunately, many of these proposed changes, if enacted into law, would fundamentally change the way credit card companies do business.

For example, interfering with the fees credit card companies impose on consumers who pay late or go over their credit limits would alter credit card risk management.  The people who are getting charged these fees are failing to use their credit wisely.  Unfortunately, responsible credit users will pay the price for the irresponsible credit management of others.  This price may be a reduction in 0% offers, higher interest rates, and a return to annual fees.

Another major sticking point is protecting cardholders against arbitrary interest rate increases.  Here, the definition of arbitrary is the point of interest.  Many credit card companies utilize a wide range of data on consumers, such as their credit scores and recent credit history, to determine the interest rates they charge.  When a consumer’s credit score drops or credit report changes, credit card companies “reprice” the consumer’s interest rate to control risk.  Without the ability to reprice debt from consumers that become risky, credit card companies will again rob Peter to pay Paul.  And, in this case, Peter is the consumer that pays his bills on time.

While the Credit CardHolders’ Bill of Rights is not expected to become law this year, many believe it will pass early next year.  In the interim, credit card companies may be bracing themselves by limiting the availability of credit to otherwise worthy consumers and making it harder to get 0% interest rates.

The next few months will be interesting in the credit card world.  And consumers should be prepared.  If you don’t have a 0% credit card in your pocket today, you may not be able to get one two or three months from now, regardless of how good your credit is. 

This website was designed to help consumers save money with 0% interest rates.  In the coming months, that may be a difficult mission.  However, until this bill passes, its a good time to take advantage of the 0% deals available. 

For more information, you can compare 0% APR credit cards and apply online at our main site.

An article in today’s Wall Street Journal by Mark Gongloff aptly titled, “Credit Cards Next in Line For Tightening,” shines a light on the not so bright future of credit cards.  In the article, the author quotes Richard Moody, chief economist at Mission Residential.  His words should send a shiver down consumer spines.  He states, “Banks are…trying to raise rates and tighten terms on payment.”  In other words, if you haven’t locked in a fixed rate or taken advantage of a 0% APR offer, you may be in for some uncomfortable increases in your current interest rate.

Furthermore, credit card companies have raised the credit scores required for approval for many of the best deals, leaving consumers who are looking to refinance to a 0% rate out in the cold.  As I’ve written previously, those 0% rates may soon expire as well.

What options does this leave consumers?  If you don’t have a 0% credit card, get one now.  Not only can you save a substantial amount of interest on your current credit card balance, you can shield yourself against increases.  If you’re one of the lucky consumers who does not carry credit card debt, you may also want to consider a 0% APR credit card as an insurance policy in case you may need to use your credit card in the near future.

Whatever your current position, it is better to act now than wait for things to get better.  And with a 0% credit card, you can limit your interest expenses during the next year, which may be the roughest many of us have ever seen.

For more information on 0% credit card offers, please review the appropriate section of our website.

However, as has been the case with Bank of America, Citi, and Capital One, Chase has lifted the maximum dollar amount on balance transfer fees to infinity.  For example, if you transfer a $5000 balance to the popular Chase Platinum Visa® Card, the cost will be $150.  Prior to this recent change, it would have been $99. 

As we’ve written recently, the credit crunch and resulting turmoil on Wall Street is having a very negative impact on the quality of credit card offers available, even to people with superb credit.  Unfortunately, things are likely to get worse.  Consequently, we continue to encourage anyone who is considering a balance transfer to do it now while decent, low fee 0% offers are still available.

April 28 2009 Update:  After a visitor posted on this site recently, I took a look at this posting from October of 2008 and really got a sense of how much the balance transfer landscape has changed, particularly in regards to fees.  Today, every major issuer is charging full 3% balance transfer fees on 0% deals and Bank of American has announced plans to raise balance transfer fees to 4% on June 1st.

While everyone enjoys being correct about a prediction, on this matter, I truly wish I was wrong.  Unfortunately, most of the dire predictions I began blogging about late last year are coming to fruition.  And, while my prediction that 0% balance transfers may soon disappear has yet to become completely true, these offers continue to be for shorter durations, regardless of the company.  So, lets all hope I’m wrong about 0% rates disappearing.