Credit card issuers are mailing 0% balance transfer offers again, but they often come with a catch: steep transfer fees. How steep? A recent Citibank mailing featured a balance transfer with a 7% balance transfer fee – a new record. On average, these fees run 4-5% of the amount transferred.
Yesterday I spoke with Anuj Shahani, Synovate Director of Competitive Tracking Services. Synovate’s Mail Monitor keeps a tab on credit card mailings and identifies trends.
Shahani pointed out that just a few years ago, balance transfer fees were typically capped at say $75, or maybe $99. But 100% of the major issuers have eliminated caps on balance transfer fees. Transfer a $5000 balance to that Citibank card with the 7% fee and you will pay $350. Ouch.
But apparently there’s a method to this madness. Issuers want to lure good customers with “new” debt while discouraging strapped consumers from bringing over their “old” debt that may prove to be difficult to collect in the long run. Of course, trying to find consumers willing to transfer good debt versus bad debt hasn’t gotten any easier.
To try to accomplish that, issuers aren’t sending these offers to just anyone. Two-thirds of them are going to prospects with super prime FICO scores of 750 or above. That’s a big change from 2007 when less than half of these mailings targeted those with super prime scores. Shahani says the good news is that these offers aren’t going to consumers who might be tricked into applying, only to be rejected. If you make the cut, you’re more likely to be approved.
If your credit is strong enough to get one of these offers, you’ll likely be offered a 0 – 2.99% introductory APR on balance transfers, good for eleven months on average. Once that expires, though, you’ll likely face a variable interest rate that may look decent now, but won’t seem so attractive when interest rates in the economy start rising again.
And if you have poor credit scores you may be out of luck. Fewer than 5% of offers in the last quarter went to someone with a FICO score of 620 or below. And therein lies the rub. If you need a low rate, it’s hard to get one.
Check out a number of 0% balance transfer cards offered by Credit.com here… http://www.credit.com/credit-cards/Balance-Transfers.
Photo by Tony the Tiger, Wikimedia Commons
Gerri Detweiler Credit.com's Personal Finance Expert, Gerri focuses on financial legislation, budgeting, debt recovery and consumer savings information. She is also the co-author of Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights, and Reduce Stress: Real-Life Solutions for Solving Your Credit Crisis as well as host of TalkCreditRadio.comTalk Credit Radio. Reach Gerri at creditexperts@credit.com.
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