During the darkest days of the credit crunch, consumers looking to reduce interest expenses and repay credit card debt at a 0% rate had very few options. Only a few credit card companies actively promoted 0% balance transfer credit cards and the offers available were short in duration and long on fees.
Last fall, things began to change. With an improving economy, credit card companies began extending the length of balance transfer offers from six to twelve to a peak of twenty-four months. During the past two months, credit card companies have begun cutting back on balance transfer deals. Currently, the longest 0% APR balance transfer offer lasts 21 months – a massive improvement from 2009, but still shorter than the best deals offered during the early months of 2011.
Unfortunately, the credit card market changes quickly and two months from now, the longest balance transfer offer available may be significantly shorter than what is on the market today. That in itself is a good reason to take advantage of current offers. However, it is just one of many, the top three of which I’ll outline below.
1.) Waiting Costs Money: The longer you put off doing a balance transfer, the more you’ll pay in interest. If, for example, you have $4,000 of debt on a credit card with a 15% interest rate, you spend $50 a month on interest. Stalling for two months thus wastes $100 that could have been saved by taking action sooner. Sure, it isn’t a fortune, but why waste $100 when you save that money by spending ten minutes filling out an online application.
2.) Balance Transfer Offers Aren’t Getting Any Better: The best balance transfer offers available today are as good as they get. A year ago, getting a 0% APR balance transfer for one year with a 3% fee would have been difficult. Today, you can get a 0% APR for 21 months and only pay a small 3% fee. Ultra-long promotional rates and low fees have been around since the fall of 2010, but have started to decline in recent months. Since banks are in competition with each other for your business, when one bank decreases the length of an offer, other banks follow suit. Thus, long 0% balance transfer deals could quickly disappear if competition among banks grows less intense.
3.) It’s the Economy, Dear Reader: Both a good economy and a bad economy could spell bad news for consumers seeking balance transfers. Why? If the economy worsens, banks are likely to not only decrease the length of balance transfer offers, but also make it more difficult for consumers to get approved.
Conversely, if the economy picks up steam and begins to improve, the Federal Reserve may begin increasing interest rates, which will lead banks to increase rates and shorten the length of 0% deals. Thus, unless the economy continues to muddle along as it is today, balance transfer offers are likely to grow shorter in length.
All things considered, consumers who can save money with a balance transfer – which is essentially anyone with $2,000 or more of debt they cannot repay within three months – should get off the fence and take advantage of current deals. Acting now not only eliminates current interest expenses, but it also ensures that consumers get the best possible deals before they are pulled from the market.
To learn more and compare offers, please see the balance transfer credit card comparison section of Smart Balance Transfers or test out our balance transfer calculator to find out how much you can save.