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.
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.