 About No Fee Balance Transfers
No Fee Balance Transfer Update: On December 4th, 2008, the last no fee balance transfer credit card offering a 0% APR for 6 months issued by a major bank was pulled from the market by Bank of America. Additionally, consumers should be aware that many credit cards currently advertising a 0% APR for "up to 1 year" may approve your applications and only grant you a 0% APR for as little as 3 months. Consequently, we now recommend applying for a balance transfer credit card that offers the longest 0% rate periods as well as low long term interest rates, as securing 0% rates may become quite difficult for the foreseeable future.
Information about No Fee Balance Transfers: Due to the dramatic changes in the credit card market that have taken place in the past three months, we recently added an article about the history of balance transfer fees which discusses why these offers are no longer available and why balance transfer fees will soon increase to 4%. Also, additional information about current no fee balance transfer offers can be found in our regularly updated no fee balance transfer alert page.
Additional Information about Balance Transfer Fees
NEW! A Brief History of Balance Transfer Fees: Last year, there were a handful of credit cards still offering no fee balance transfers and offering 0% interest rates for 1 year. Two years ago there were a lot of no fee offers. Today, balance transfer fees are on the rise, with most companies charging 3% balance transfer fees with no maximums, while others have increased these fees to 4%. Unfortunately, balance transfer fees are the least of our worries. Many companies have been cutting back the length of 0% APR terms from 15 months to 12 months and now, to as little as 3 to 6 months. To get a sense of the direction of balance transfer fees, please see this article on the history of balance transfer fees.
On the Balance Transfers Blog: This article from late April 2009 discusses the rise of balance transfer fees, particularly in regards to individuals transferring balances in excess of $2500. Learn more about the credit card fee new regulations are not addressing.
About No Fee Balance Transfers (When They Existed): Until the credit crunch began, a number of companies offered 0% interest rates for a full year on no fee balance transfers. When these offers were available, a consumer could save $75 or more on every balance transferred and get all the benefits of a 0% APR for a year.
Unfortunately, all the major issuers ceased offering 0% for 1 year, no fee deals in early 2008. In December of 2008, the last credit card that offered no fee balance transfers and a 0% APR for 6 months issued by a major credit card company was pulled from the market. Consequently, consumers have little choice but to pay balance transfer fees should they desire to take advantage of the savings provided by a 0% APR.
Fortunately, paying balance transfer fees is not nearly as bad of a deal as one might think. While a nuisance, they hardly put a dent in the substantial savings one can reap with a 0% APR for a full year. And, while credit cards that offered a 0% APR for a year and charged no balance transfer fees were unquestionably the best deal in town, no fee deals that only offered a 0% APR for 6 months actually offered consumers significantly less savings than deals that included fees. Below is an example of how one of these cards, which is no longer available, could cost consumers much more money in interest than they would have otherwise paid in fees.
The Real Costs of No Fee Balance Transfers (When Consumers Could Still Get Them): When it was possible to get a no fee balance transfer with a 0% APR for 6 months, most consumers were still better off paying the fees and opting for a card that offered a 0% APR for a full year. One issue with cards that only offered 0% rates for 6 months lay in the fact that it could take up to 1 month for a balance transfer to clear. This, in effect, shortened the 0% period to 5 months. A second, more important issue was the go to interest rate. When the 0% period expired, consumers were left with interest rates similar, if not higher than their current rates. The most recent no fee balance transfer offer to be pulled from the market charged a 14.99% interest rate once the 0% period expired.
Over the course of a year, the amount of money you can save with a balance transfer credit card that offers a 0% APR for a full year is close to 40 times what can be saved with this 0% for 6 month offering. Here's an example for someone transferring $4000 from a credit card with a 14% interest rate.
With the last available no fee card, the PetRewards™ Platinum Plus® Visa®, you would have initially saved $120 on balance transfer fees and $240 on interest during the 0% period. However, even if you paid down your balance to $3000, the 14.99% interest rate charged after the 0% period expired would have ended up costing you $217, bringing your total yearly savings to a paltry $13.
A few months ago, it was relatively easy to transfer balances over and over again. Thus, when the 0% APR expired, you could simply move the balance to a new 0% card. However, this is becoming increasingly difficult, and may become more so in the months to come. So once the 0% period expired, there was a very good chance you'd be stuck paying the full interest rate.
Now, with a credit card that offers a 0% APR on balance transfers for a full year, the cost of a $4000 balance transfer would be $120 in fees. However, over the course of a year, you would save $597 on interest, for a net savings of $477. That's quite a bit more than $13. And this doesn't even factor in the money that can be saved by taking advantage of the 0% APR on purchases.
Because of the substantial difference in one year savings, we recommend cards that offer a 0% APR for a full year, such as the Discover More Card. In addition to providing a full year without interest, a card such as this also offers protection against the declining availability of credit. Most of us have become accustomed to 0% balance transfer offers. But as the credit crunch continues, the 0% APR balance transfer could easily go the route of the no fee balance transfer and the dinosaur.
Review 0% APR Balance Transfer Offers |
