Balance Transfer Fees in 2009
During 2008, most credit card companies not only ended no fee balance transfer offers, but also raised the cap on fees from 3% up to a maximum of $75 to a full 3% of all transactions.
This change in credit card terms has driven the cost of doing a balance transfer up substantially.
For example, a $10,000 balance transfer would have only racked up $75 in fees under the old structure.
Today, that same transfer would cost $300, a 400% increase.
Despite the fact that it is more expensive to do a balance transfer now than it was nine months ago, 0% interest balance transfers remain one of the best tools available for consumers looking to get out of credit card debt and reduce interest expenses.
Unfortunately, the outlook for 0% deals isn't particularly bright.
While the major credit card companies were raising balance transfer fees, they were also reducing the length of time 0% balance transfers covered.
For example, it was not impossible to find a card that offered a 0% APR for 15 months or a fixed APR for life as little as 6 months ago.
However, offers such as these are no longer available to consumers.
Currently, the standard offer for a balance transfer offer is 0% for 1 year with a full 3% fee.
While this is by all means a very good deal, there are a number of fine print catches to be wary of.
For example, many credit card companies are advertising a 0% APR for up to 1 year.
With one of these offers, you may be approved for a credit card, but only offered a 0% rate for as little as 3 to 6 months, based on a review of your credit.
This is known as tiered pricing, and qualifying for the top tier is getting more and more difficult of late.
Given the dramatic changes in the credit card market, consumers have little choice but to accept the fact that 3% balance transfer fees are here to stay.
However, it is important to look at these fees as a nuisance, not a deterrent.
A person with $5,000 of credit card debt on a credit card with a 14% interest rate would save $746 on interest during the 0% period.
Even with $150 in balance transfer fees, the interest savings still totals just under $600.
The real issue with balance transfers this year will not be pesky fees.
In fact, getting a no interest balance transfer that lasts a year may prove challenging in the coming months.
The fact of the matter is this: if you have money on a high interest credit card, do a balance transfer now while these offers are still available.
If credit card companies continue down the path that they are on, you'll be happy you did.
This change in credit card terms has driven the cost of doing a balance transfer up substantially.
For example, a $10,000 balance transfer would have only racked up $75 in fees under the old structure.
Today, that same transfer would cost $300, a 400% increase.
Despite the fact that it is more expensive to do a balance transfer now than it was nine months ago, 0% interest balance transfers remain one of the best tools available for consumers looking to get out of credit card debt and reduce interest expenses.
Unfortunately, the outlook for 0% deals isn't particularly bright.
While the major credit card companies were raising balance transfer fees, they were also reducing the length of time 0% balance transfers covered.
For example, it was not impossible to find a card that offered a 0% APR for 15 months or a fixed APR for life as little as 6 months ago.
However, offers such as these are no longer available to consumers.
Currently, the standard offer for a balance transfer offer is 0% for 1 year with a full 3% fee.
While this is by all means a very good deal, there are a number of fine print catches to be wary of.
For example, many credit card companies are advertising a 0% APR for up to 1 year.
With one of these offers, you may be approved for a credit card, but only offered a 0% rate for as little as 3 to 6 months, based on a review of your credit.
This is known as tiered pricing, and qualifying for the top tier is getting more and more difficult of late.
Given the dramatic changes in the credit card market, consumers have little choice but to accept the fact that 3% balance transfer fees are here to stay.
However, it is important to look at these fees as a nuisance, not a deterrent.
A person with $5,000 of credit card debt on a credit card with a 14% interest rate would save $746 on interest during the 0% period.
Even with $150 in balance transfer fees, the interest savings still totals just under $600.
The real issue with balance transfers this year will not be pesky fees.
In fact, getting a no interest balance transfer that lasts a year may prove challenging in the coming months.
The fact of the matter is this: if you have money on a high interest credit card, do a balance transfer now while these offers are still available.
If credit card companies continue down the path that they are on, you'll be happy you did.
