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Wealth and Wants

Balance transfer cards bounce back

These cards almost disappeared in 2020, but banks are issuing them again as the economy rebounds

Summary

Balance transfer cards were scarce in 2020 but as the economy is making a comeback, banks are starting to issue them again. If you have credit card debt, this could be a great way to get rid of it.

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In 2020, 0% balance transfer credit cards might as well have gone on the endangered species list. But they’re making a comeback as the economy rebounds. Signing up for one of these cards is a smart strategy if you have credit card debt.

Card issuers lost their appetites for balance transfers when the COVID-19 pandemic upended the economy early last year. It made perfect sense given the high unemployment rate – which peaked at 14.7% in April 2020 – and the tremendous amount of uncertainty that permeated just about everything.

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Since credit card debt is typically unsecured – and often the first to go unpaid and the first to be discharged in a bankruptcy – lenders had plenty of reasons to worry that their customers wouldn’t pay them back.

The last thing they wanted to do was to take on someone else’s debt. And that’s essentially what a balance transfer is: moving debt from one card company to another, usually with a 0% promotional rate that lasts for a year or more.

Balance transfers are currently sprouting back to life just like spring flowers. The expected surge in delinquencies and charge-offs has not occurred – thanks in large part to robust government stimulus –the vaccine rollout appears ahead of schedule and optimism abounds.

In February 2020, card companies sent about 300 million direct mail promotions for balance transfers and/or low introductory purchase APRs, according to Competiscan. By June 2020, the figure had plummeted to around 25 million. It broke back above 100 million in December 2020 and remained there in January 2021, the most recent month for which data is available. Like travel, balance transfers are not all the way back by any means but they’re on the mend.

Bank of America returning to pre-pandemic underwriting criteria

For much of 2020, credit card originations hovered between half and two-thirds of where they were at the same time in 2019, Equifax reported. In early January 2021, for the first time in about 10 months, there was a week in which more credit cards were opened than the same week from a year earlier.

While that was a bit of an outlier, the rest of January 2021 remained in the 75% to 80% range of where we were at the beginning of 2020. That’s a firm step in the right direction. And we’ve seen many additional improvements since then on the health and economic fronts.

During Bank of America’s Q1 2021 earnings call on April 15, Chief Financial Officer Paul Donofrio revealed that the bank has returned to its pre-pandemic underwriting criteria.

For much of 2020, its primary balance transfer card, the BankAmericard® credit card, disappeared from the marketplace. Now it’s back with an 18-month, 0% introductory APR on purchases and balance transfers made within 60 days of opening the account (the standard APR after that is a variable 12.99% to 22.99%). That’s three months longer than its pre-COVID offer. Note: The BankAmericard charges a balance transfer fee of 3% or $5, whichever is higher.

Recommended balance transfer cards

The longest 0% balance transfer promotion that’s currently on the market is 20 months on the U.S. Bank Visa Platinum Card. That rate also applies to new purchases. After 20 billing cycles, the variable APR currently ranges between 14.49% and 24.49%. Its balance transfer fee is also 3% or $5, whichever is higher.

Citi is another major player in the balance transfer space. The Citi® Diamond Preferred® Card, the Citi Simplicity® Card* and the Citi® Double Cash Card all offer 18 months with 0% interest on balance transfers.

The Diamond Preferred and the Simplicity also include new purchases in that deal. After the term, those two have variable APRs between 14.74% and 24.74%. The Double Cash’s typical variable rate is 13.99% to 23.99%. All three charge a balance transfer fee of 3% or $5, whichever is greater.

One other card with an 18-month interest-free period on balance transfers and introductory purchases is the Wells Fargo Platinum card. Its regular APR is 16.49% to 24.49%, and its balance transfer fee is 5% or $5, whichever is higher.

A year after they went into hiding, generous balance transfer deals are now abundant. Some issuers are more willing than others – for instance, American Express and Chase remain on the sidelines – but balance transfers are once again a compelling, money-saving strategy for many people with credit card debt. By my estimation, you probably need a credit score of at least 700 for a good chance of approval. Check out our free CardMatch tool and the approval odds section of our 0% balance transfer page for recommendations tailored to you.

Here’s how much a 0% balance transfer can help you 

Let’s say you owe $5,315 on your credit cards, which is the national average, according to Experian. We’ll also assume you’re paying the average credit card rate, which is 16.15%, as of April 21, 2021. If you make only minimum payments, you’ll be in debt for almost 16 years and you’ll pay nearly $6,000 in interest (for a grand total of more than $11,000). That’s crazy.

Even if you commit to a much more aggressive 20-month payback cycle, you’ll incur about $800 in interest if you have the average credit card debt and you pay the average rate. Avoiding that is the beauty of a 0% balance transfer promotion.

If you have credit card debt, forget about rewards for now. Get the lowest rate you can and attack that debt so you can pay it off completely by the end of the term. Spread equally over 20 months, $5,315 works out to just $266 monthly if you’re not paying interest. Now that’s a reward to be excited about.

Have a question about credit cards? E-mail me at ted.rossman@creditcards.com and I’d be happy to help.

*All information about the Citi Simplicity Card has been collected independently by CreditCards.com and has not been reviewed by the issuer. The Citi Simplicity Card is no longer available through CreditCards.com.

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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