During the past four years, American Express offered a fixed APR of 4.99% for life with its Blue and Blue Cash cards, as well as no fee 5.99% fixed APR balance transfers with its Clear card.  Now, consumers will not only be asked to pony up a 3% fee to transfer a balance, they’ll have to pay a hefty APR in the low teens a year later.

The message is pretty clear.  Amex doesn’t want your balance transfers.  Every other major issuer still offers 0% balance transfers, though many have raised fees.  The one bright spot remains Discover, which offers low fees and 0% APRs for a year on both purchases and balance transfers.

One thing American Express does what you do to do is spend, spend, spend.  They are still offering 0% interest rates on purchases for up to 1 year with many of their products.  You can review American Express credit cards in their section of SmartBalanceTransfers.com.  You can also review 0% APR balance transfer offers in that section of SmartBalanceTransfers.com

As always, we’ll keep you posted on any new developments.

Sources:  American Express, Discover

Here’s how the trick works. We’ll assume we’ve got a $2000 balance on credit card one getting charged 15% interest and another $2000 on credit card two at the same rate. A mail offer from credit card company one offers you a fixed 4.99% APR for life on balance transfers. On the surface, it looks like a good deal: we can reduce our interest rate by 2/3. However, there’s some nasty trickery just below the surface.

First, we’ll start with the fees. 99% of credit cards charge a 3% balance transfer fee. So, to transfer $2000 from card two, it’ll cost $60 upfront. Now, that’s not a terrible deal, since the higher interest rate would have cost us $200 more in interest over the course of the year ($140 when you factor in the fee). However, once the balance is transferred, the real trickery begins.

If you look at the fine print of the 30 page disclosures pamphlet credit card companies are required to send you every time they make a change to their terms and conditions, you’ll discover that any time you make a payment, the payment will be credited towards the balance on your credit card with the LOWEST INTEREST RATE. When we transferred our balance to the low fixed rate, we agreed that all our payments will reduce the balance being charged 4.99% interest.

What does this mean? Well, let’s say we decide to pay off $2000 of our debt. We’ve just eliminated the entire low APR balance and now have $2000 of debt being charged 15% interest. Not only are we right back where we started, we’ve wasted $60 in balance transfer fees.

Is this practice atrocious? Yes. Detestable? Clearly. Legal? 100%. Avoidable? Now it is.