Our research finds balance transfers remain generous, even in a rising-rate environment, as card issuers hesitate to hike fees or trim introductory offers.
Balance transfer card offers have been relatively unaffected by three Federal Reserve benchmark rate hikes this year, according to our survey of 100 major credit cards. Average interest rates for a balance transfer rose about 0.88 percent since January – about in line with the Fed’s three rate increases totaling 0.75 – and card issuers have so far been reluctant to increase fees and trim introductory offers.
Analysis of the terms and conditions of the cards surveyed revealed many balance transfer deals remain unchanged since January 2017, when the survey was last conducted. The same number of cards (89) allow balance transfers, offer 0 percent interest for a limited time (38) and charge a fee of 3 percent for each transfer (54 cards).
Our survey of a market-representative sample of 100 credit cards from major issuers found:
- Rates rose: In our previous survey, the average post-introductory-period APR came in at 18.45 percent. Now, it is 19.33 percent, an increase of 0.88 percent.
- Transfer options hold steady: Eighty-nine cards allowed balance transfers, the same number as when cards were last surveyed in January. Of those, 41 offered a lower rate introductory offer.
- Zero-percent deals still available: Thirty-eight cards offered 0 percent interest for a limited period of time, the most common of which was 12 months.
- Fees are nearly unavoidable: Only nine cards in the survey did not charge a balance transfer fee, compared to 12 cards in January. Of the remaining cards, eight offered a special introductory fee, such as 3 percent opposed to 5 percent, and only three cards were fee-free for a limited time.
- Without a promo offer, interest accrues fast: Not one of the 79 cards that disclosed how their balance transfer interest is assessed had a grace period. That means in absence of a zero-percent introductory offer, your balance transfer starts accruing interest the moment it posts to your account.
Balance transfer deals can help offset rate hikes on other cards
The Federal Reserve hiked interest rates in March, June and again last week. Some analysts believed at the beginning of the year that credit card issuers would raise balance transfer interest rates accordingly and offer less-generous deals.
However, among the cards that offer balance transfers, not much has changed – yet.
Cards with limited-time promo offers and fee discounts
- Bank Americard Mastercard
- Bank Americard for Students
- Slate from Chase
- PNC Points Visa
- Wells Fargo Cash Wise card
- Wells Fargo Cash Back College Card
- Wells Fargo Propel American Express card
- Wells Fargo Rewards card
“If you’re revolving a balance, as the rates go up, you’re starting to think about, ‘Well, I need to revolve this for a period of time,’” said Michael Moeser, director of payments at Javelin Research and Strategy. “It makes the balance transfer more important.”
Even though the number of cards offering balance transfers has stayed the same, the number of cards that never charge fees on them decreased by three since January 2017.
Issuers such as Chase, which is losing money on cards with large sign-up bonuses, could attempt to make up lost revenue in other ways, Moeser said. One likely target would be reinstating a balance transfer fee on the currently fee-free balance transfer deal available on the Chase Slate card, said Moeser.
Interest-free offers still plentiful
Interest-free 0 percent interest rates are a major draw for consumers, making it likely that issuers will keep offering introductory deals, Moeser said.
Of the CreditCards.com survey pool, 41 cards offered a teaser rate to new cardholders. Of those, 38 cards offered 0 percent interest on balance transfers, usually for an entire year.
“A balance transfer can be a good opportunity to save money on interest and fees while being able to get control of your debt,” said Bruce McClary, vice president of communications at the National Foundation of Credit Counseling.
For consumers with good credit, there are deals to be had. Among the cards surveyed, the Citi Diamond Preferred card (no annual fee), for example, offers the most lucrative deal offering 0 percent interest on balance transfers and purchases for 21 months. The Chase Slate card (also no annual fee) , while offering a reduced 0 percent interest deal of 15 months for balance transfers and purchases, does not charge a fee if the transfer is made within 60 days of opening the account.
Be on the lookout for fee-free deals
However, the Chase Slate card deal is in the minority. Only nine cards in the survey don’t charge a balance transfer fee (see box) and eight other cards lessen or waive the fee for a limited amount of time.
The most common fee charged by issuers was 3 percent of the amount transferred, often with a minimum of $5 or $10.
Five cards, four of which are offered by Wells Fargo, lessen the balance transfer fee for a limited amount of time, but only from 5 to 3 percent.
A 0-percent introductory rate isn’t the only thing to consider when considering a balance transfer deal, according to credit experts.
“They are one of the most effective tools out there when used properly, and most people don’t use them properly,” said Ryan Frailich, a credit counselor with Deliberate Finances in New Orleans. “If you are able to actually work out how you’re going to make it work, then I think it can be a great tool.”
For example, do the math to figure how much you need to pay each month to pay off a balance during a 0 percent introductory offer and do not add to the balance during that payoff period.
Credit counselors strongly advise cardholders to double-check what their rates and fees will be after the introductory periods have expired.
Cards with no balance transfer fee
Commonly, balance transfer cards charge a 3-5 percent fee to transfer a balance, but these cards let you do it for free.
- Capital One QuicksilverOne rewards card
- Capital One Spark Cash Select for Business
- Capital One Venture Rewards card
- SonyCard Visa from Capital One
- Spark Classic from Capital One
- Spark Miles Select by Capital One
- Navy Federal Credit Union cashRewards Visa
- Navy Federal Credit Union Platinum card
- Pentagon Federal Credit Union Promise Visa
The lowest balance transfer APR of the cards surveyed was 6.99 to 18 percent offered on the Navy Federal Credit Union Platinum card (with no 0 percent promotional deal), while the highest APR charged is 27.99 percent by the Meijer Mastercard, which also does not offer a 0 percent deal.
Frailich recommends consumers sit down and map out what you need every month to pay off your balance as quickly as possible and where that money will come from in your budget.
If consumers do their due diligence, they could save a significant amount of money in the long run with a balance transfer card.
“If you’re saving money on interest and you’re saving money on fees, you’re already ahead of the game,” McClary said. “If you can move a balance from a higher interest rate, higher fee credit card, to one that has a lower interest rate and lower fees, then it seems to be a win-win.”
The December 2017 Credit Card Balance Transfer Survey of 100 U.S. credit cards was conducted in December 2017 by CreditCards.com. The 100-card survey pool is a representative sampling of cards from all major U.S. card issuers. Information was gathered from the cards’ terms and conditions documents, any publicly available cardholder agreements and phone calls to issuers.