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 No Fee Balance Transfer News
Editor's Update April 16 2009: Not only are no fee balance transfers a thing of the past, Bank of America will soon be raising balance transfer fees from 3% to 4% beginning on the first of June. It may only be a matter of time before more companies follow suit.
Editor's Update December 4th 2008: Today, Bank of America ceased offering the last major credit card that provided a 0% APR and still charged no balance transfer fees. This offer is that latest victim of the credit crunch and comes as no surprise, since banks have not only been canceling no fee offers, but raising balance transfer fees all year long.
In some ways, the removal of this no fee offer is a good thing for some consumers. Many visitors have written Smart Balance Transfers wondering whether they would be better off with a no fee balance transfer for 6 months or a card that charges fees, but offers a 0% APR for a full year. In almost every circumstance, the better offer is the one that charges fees and offers a 0% APR for a full year. The only exception to this case is for those who would be repaying their balances in full within 6 months.
A year ago, it was also reasonable to assume most people could do multiple balance transfers when their 0% rates expired. However, as the credit crunch has intensified, this has become more difficult. In fact, people who can lock in a 0% APR today should consider themselves lucky, as many credit card companies have made it significantly more difficult for consumers with good credit to get approved for these offers.
Below is an article that discusses how consumers could save more money by paying fees and taking a longer 0% period when 0% APR no fee balance transfers were available . Hopefully, this article will be relevant again in the future. However, it may give comfort to those who shudder at the idea of paying balance transfer fees.
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When No Fee Balance Transfers Existed, They Weren't the Best Deal
Last year, there were a handful of credit cards that offered 0% APR, no fee balance transfers for a full year. Today, there are none. You can definitely blame the credit crunch for this one. As the credit market has worsened, the no fee balance transfer deal has disappeared. The last available 0% APR no fee balance transfer deals only lasted for 6 months, after which the interest rate ballooned to 14.99% or higher. They too have been removed from the marketplace.
Below, using these now defunct no fee offers as an example, we'll examine why getting a 0% APR for a full year and paying balance transfer fees is generally the best way to save money on interest.
Just how much, or shall I say, little could a person have saved with a no fee offer with a 0% APR for 6 months. On a balance transfer of $4,000 from a credit card with a 14% APR, a no fee card would have saved you $120 on fees. During the 0% period, you could have also saved about $240. However, even if you had paid down your debt to $3000 during the first six months, you would still have paid around $217 in interest over the next six months. This would have left you with under $20 in total savings.
Netting $20 in potential savings is clearly not the best way to reduce interest expenses and pay down credit card debt. Thus, if you would not have been able to repay your balance in full in 6 months, the best (and safest) option would be the only option currently available: pay balance transfer fees and get a card that offers a 0% APR for a full year. This, unfortunately, is not as easy as it may seem.
As you'll notice on our site, just about every credit card advertises a 0% APR for "up to 1 year". However, most major credit card companies offer tiered pricing. With tiered pricing, only consumers with superior credit scores will get a 0% APR for a full year. Many consumers, even those with very good credit, may get a 0% rate for only 3 or 6 months. At present, the Discover More Card is one of the few offers on the market that delivers a 0% APR on balance transfers and purchases for a full year to all approved applicants.
How, then, does the Discover More Card stack up against a no fee balance transfer offer. In short, very well. Sticking with the $4000 balance we used above, the Discover More Card will save you about $590 over the course of a year in interest. Taking the 3% fee into account, total savings come to around $470. This is substantially more than the $20 bill a no fee balance transfer would put in your pocket over the same period. Plus, this card comes with a 0% APR on purchases, which can increase interest savings even more.
Ultimately, the money that could have been saved with a short term no fee balance transfer is significantly less than what can be saved with a 0% APR balance transfer for a full year. When applying for a new card online, however, be sure to inspect the fine print to guarantee you get a 0% APR for a full year.
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