Are No-Fee Balance Transfer Offers On Their Way Back?

This is what happens when you spend all day reading, writing and editing stories about personal finance. You start to do strange things in your off-time — like reading the “Terms and Conditions” on pre-screened credit card offers for fun.

I don’t plan to apply for a new card anytime soon; but I love ripping open the envelope, checking the APR and scanning through the fine print for tricky fees, misleading disclosures and, of course, potential deals.

Yesterday, I received an especially interesting offer. Splashed in orange on the outside of the envelope was something I hadn’t seen in a long time: a 0 percent, year-long balance transfer offer without a balance transfer fee. I thought fee-free balance transfers were (nearly) extinct.

Before the recession, these types of offers were common. But dual pressure from the credit crisis and the Credit CARD Act of 2009 forced card companies to reassess how they turned a profit – and promotional balance transfer offers took an especially hard hit.

After nearly disappearing during the recession, sweeter balance transfer offers began popping up again last year. But the card offers looked noticeably different. For one thing, the fees were higher. According to Andrew Davidson, senior vice president at Mintel Comperemedia, issuers typically offered 3 percent or less before the Credit CARD Act of 2009 went into effect. But now fees range anywhere from 3 percentto 5 percent and, according to Davidson, the trend is for the fees to keep going up.

The majority of card issuers have also scrapped the $50-$100 caps on balance transfer fees that were the norm before the recession — forcing cardholders with high balances to pay big bucks to transfer their balance to a new card.

That’s why the limited-time fee-free deal that I received in my mailbox yesterday is so intriguing. It’s a sign that the credit card industry is picking itself back up and sending out sweeter promotions for new cardholders. Davidson also speculates that the trend toward higher balance transfer fees has created a unique opportunity for issuers to “buck the trend” and set themselves apart in a competitive marketplace with a fee-free offer. So this is probably not the last time that I’ll see a similar deal.

That said, like any promotional offer, it’s not a free lunch. When I took a closer look at the terms and conditions, I saw that the balance transfer fee after the promotional period expired would shoot up to 5 percent without a cap. And if I missed a payment, my APR could range anywhere from 16.99 percent to 24.99 percent indefinitely. The purchase APR raised an eyebrow too: The offer ranged from 10.99 percent to 18.99 percent, depending on my creditworthiness. That’s a big 8-point range, and I won’t know what offer I’ll really get until I apply.

That’s why if you’re thinking about taking advantage of a similar offer, it’s important to thoroughly read the terms and conditions and consider what you’ll do after the promotional rate expires.

The Increase Focus on Balance Transfer Credit Cards

Believe or not, issuers are now competing more than ever on many levels to get your attention. As many cardholders today are still unsatisfied with their issuers and are looking to get a better deal, issuers have become more adaptive to what could get you to swing their way. While some have focused more on the rewards offered to consumers, others are competing in an entirely different way. They are using introductory periods on purchases, balance transfers, and even cash advances to get their plastic in your pocketbook.

So what offers seems to be getting the more attention from both issuers and consumers? Over the last couple of months many of the credit cards that consumers have migrated to were offers giving the lowest rate and best deals on balance transfers. While it is not the case for everyone, many people are looking for a way to help ease the stress of minimum payments rising on existing balances as well as tough economic times. Knowing this, issuers have become more aggressive by offering consumers deals on the length of no or low interest rates on transferring their existing balance from a competing issuer. Two of the newest deals that seem to be gaining traction with cardholders are Citi Bank’s offering of 18 months and Discover’s offering 15 months, both at zero percent interest.

As issuers become even more aggressive to get your attention by offering great incentives like that of introductory periods, as with any credit card one needs to completely understand everything about their future plastic before signing their name on the dotted line. In many cases, just by simply reading any terms associated with the plastic one will find any fees that are commonly associated with such things as transferring over balances or taking out a cash advance. By overlooking things such as this, it could end up costing you more money than you think negating any saving that you are trying to get by moving to a new plastic.

Balance Transfer Credit Cards Worth Getting

When it comes to getting a credit card to transfer any balances you may have accrued over time, do you really know what you are getting? For some the answer to that question is yes, but for others the answer is not quite the answer they want to hear. Over the last few months we have seen many balance transfer credit cards hit the market and offer consumers great opportunities to save money with lower rates not only on the transfer but also on new purchases.

In an article written recently entitled "Editor’s Pick: Best 0 APR Balance Transfer Credit Cards 2010", we find some of the best balance transfer credit card available on the market today. While there are many cards to choose from, those that made the list offer cardholders much more than lower cost. One offers cardholders plastic that is annual fee free and another offers rewards. The top choices include cards that you may or may not be familiar with and they include Capital One Platinum Prestige Credit Card, Citi Platinum Select MasterCard and the PenFed VISA Platinum Cash Rewards Card.

While having no or a low interest rate on your balance transfer is the optimal solution for switching plastic; one needs to completely understand everything about the card they may be getting. Unfortunately for many people when they transfer balances over from one card to another they solely focus on an introductory rate that is displayed, overlooking the actually cost according to the cardholder’s terms of agreement. In these scenarios, cardholders can find themselves in more debt than before, which is harder to pay off in the long run. Just like with anything that deals with your hard earned money, it is best to completely understand the conditions and cost involved before signing your name on the dotted line.

Knowing is Key for Balance Transfer Credit Cards

As we move further into 2010, we are finding that many issuers are looking for cardholders that are fed up with their current issuers and looking to move somewhere else. Now more than ever we are seeing many issuers offering great incentives to have consumers transfer their balances to another card. Some of these incentives include great introductory rates as zero percent for up to twelve months and occasionally zero percent to up to fifteen months.

Even as balance transfer credit cards have become one of the preferred options for cardholders, there are a couple of details that cardholders must make sure they find on the application to insure they are getting exactly what they are looking for. While they may seem like they are something that cardholders would check before applying, you may be surprised on the number of people that overlook these important details that could be the difference between saving money or spending more when transferring a balance. These include knowing the following:

The Balance Transfer Fee Associated
The Length of Intro Period
When Intro Period Ends (if applicable)
Amount You Will be Transferring
Any Details About Late Payments

When looking to see if transferring a balance to another card is the right move for you there is no better way than to actually do the math. On Bankrate.com you can find a balance transfer calculator that helps determine if you are in fact saving money and when you can expect for the balance to be paid off under your new interest rate.

The CARD Act’s Focus on Balance Carriers

Since the end of last year one common theme that could be seen and heard across America was that millions of consumers were no longer looking to carry a credit card balance from month to month. Instead many have found ways to either pay off the balance or simply not use their plastic. While we would all love the ability to pay off the amount owed each month; when reality sets in, the truth is that not everyone has the ability to.

For those that have no other choice but to carry a balance, Bankrate.com has recently written an article entitled "5 ways the CARD Act helps balance carriers" that details how the regulations placed on the credit card industry are beneficial to you. In this article, the major points that are elaborated upon are the following:

Freezing of account rates after it has been opened
Beefed up protection for existing balances
Newly placed consumer-friendly payment allocations
Mandatory account reviews on cardholders
Ending of double-cycle billing

While all the points above are important, one that I personally believe helps cardholders, that traditionally carry balances over, out the most deals with the end of double-cycle billing. While the cardholder will still pay interest for carrying a balance over, they will no longer be paying as much as they would have been previously and are now able to save a little money that can be used on their outstanding balance; to pay off that amount owed.

Considering a Balance Transfer Credit Card?

With times getting tough and minimum payments rising on existing credit card balances many people are looking for balance transfer credit cards to help ease the pain. In many cases this can help in the short term and may be able to put money back in your pocket for everyday purchases. However, in a few cases cardholders have found themselves in more debt because they neglected to read and understand the credit card’s terms and agreements. According to an article called "5 Balance Transfer Trip-Ups" there are a couple of things that consumers should know before getting a balance transfer credit card in order to help save money.

In the article the 5 things potential credit cardholders must be aware of include:

Time limit of any introductory offer of transferred balances
What the zero or low interest rate actually covers
Any fees that are involved including any annual fees
Getting the actual card that was applied for
What happens if you are late on any payments

In my opinion, this is a great article to read if you are thinking about transferring a balance or even just getting a credit card in general. As stated before, knowing and understanding the terms and conditions before accepting any credit card is ideal, and in many cases it can help you determine if the card you applied for was right for you.