The typical credit card balance transfer offers have become more generous, but you have to act quickly to take advantage of them, according to a CreditCards.com analysis of 100 popular credit card offers
Compared to our survey of the same sample of cards a year ago, more cards offer a balance transfer promotional rate for at least 12 months (38 cards this year, compared to 33 last year). The number of cards with an offer lasting 15 months or more is also up, from 10 a year ago to 17 now.
The survey also finds there are good reasons to comparison shop — and to act quickly. Fees vary, and most cards that offer introductory balance transfer rates give cardholders only 90 days or fewer after the account opens to take advantage of the lowest introductory rates.
Balance transfer savings
For those who do act, the savings can be substantial. Take, for example, a consumer who has an existing $5,000 balance. Let’s say that consumer transfers the balance to a a new card with the most-common offer found in our survey: a card with a 12-month, 0-percent introductory rate and a 3 percent fee. If the consumer pays it off in a year, payments will total $5,150, including the fee. Compare that to the consumer who starts with the same debt, but pays if off using card with a typical 15 percent APR credit card. That consumer would pay $5,415 — $265 more.
To see how a 0-percent balance transfer might work for you, see our 0 percent payoff calculator.
Since 2010 CreditCards.com has surveyed promotional balance transfer offers from major issuers’ cards. To take a more comprehensive look at today’s balance transfer landscape, this year’s survey was expanded to include 100 credit cards representative of the overall U.S. credit card market.
Highlights of this year’s survey include:
- Balance transfers are the norm: 85 of the 100 surveyed cards allow balance transfers; 44 of those encourage them by cutting their rates for a promotional period.
- Zero-percent offers are common: 40 cards offer it, with another four cards offer lower-than-normal balance transfer rates for a set introductory period.
- Use it or lose it: 28 out of 44 cards give cardholders only 90 days or fewer to make balance transfers in order to qualify for the limited-time low rates.
- Expect a fee: 54 out of 85 balance transfer-capable cards charge a 3 percent or $5-$10 minimum fee, whichever is greater, for each balance transfer. A few years ago, balance transfer fees were typically capped, but those days are gone. Just three cards cap the fee.
- Fee-free, but … 10 cards do not charge any fee for a balance transfer, but there’s almost always a catch: eight of the 10 don’t discount their rates.
- Post-intro rates: The range of post-introductory balance transfer APRs is great, from as low as 9.24 percent to as high as 26.99 percent, and is almost always based on individual creditworthiness.
0-percent offers dominate
Consumers looking for a new balance transfer-friendly credit card will see a common theme among the promotions currently advertised by major card issuers: 0 percent APR for about a year.
The four cards from this year’s survey that don’t give new cardholders a 0-percent balance transfer rate promotion still offer lower-than-normal balance transfer APRs ranging from 4.99-13.90 percent, which are still lower than the average credit card interest rate of 14.89 percent.
As long as overall interest rates remain low, consumers should continue to see 0-interest rate balance transfer offers, according to Moshe Orenbuch, a research analyst with financial research group Credit Suisse.
“Interest rates are low now and they might not be quite so low a bit later on, so from an issuer standpoint one of the goals with these offers may be to attract new customers now before rates change,” he said. “Until rates start moving up, I don’t think there will be any reason to see a change in balance transfer offers.”
The Federal Reserve is expected to begin raising the federal funds rate — the basis for most credit card interest rates — starting midyear. Once it does, balance-carrying cardholders can expect to see higher interest rates charges and even different card offers as issuers adjust, so today’s relatively generous offers may not last.
Combo offers popular
Many cards surveyed have paired 0-percent balance transfer rate offers with promotional purchase rates. Of the 44 cards that offer a lowered rate for a balance transfer, 35 also have lowered purchase rates. Such combo deals entice consumers to add more debt onto their cards by adding new purchases to the amount transferred.
While these types of offer pairings can sound extra enticing to prospective cardholders, consumers should be careful about the debt that can accumulate from charging to take advantage of promotional rates, according to Kevin Weeks, president of the Association of Independent Consumer Credit Counseling Agencies.
“Just like a balance transfer offer, 0 percent on purchases only lasts so long, so consumers have the potential to pay off a no-interest debt and incur additional debt at the same time, initially with no interest but that will change down the road,” he said. “If a consumer is using a 0-percent balance transfer card as a way to pay down debt, he or she needs to ask oneself, ‘Why do you want a 0-percent offer to add more debt?'”
Duration of promotional offers
On average, the survey found the duration of promotional balance transfer rates lasts just over a year — 12.68 months.
“If you want to make a transfer now and will have a year to pay it off interest-free that already puts repayment into 2016, so as a consumer looking to make a transfer at the beginning of 2015, that’s a pretty good deal,” Orenbuch said.
Expect short windows
While the length of promotional balance transfer APR offers has grown longer, the time in which new cardholders have to make promotional rate-eligible transfers is often short.
Of the 44 cards advertising promotional balance transfer rates, 28 cards give consumers 90 days or fewer to transfer balances in order to claim the promotional interest rate. Some require very quick action: Eight cards give cardholders just 30 days to make promotion-eligible transfers.
Issuers may use these short transfer time requirements to encourage new cardholders to quickly rack up a balance. The higher the balance transfer, the higher the transfer fee and the greater the odds cardholders will carry a transfer balance past the end of their no-interest introductory period, allowing the card issuer to also charge them interest.
“From a credit risk standpoint, the longer the offer runs, the higher the risk the money-transferring cardholder is to the issuer,” said Orenbuch. “From that perspective, 90 days actually sounds like a long time to me.”
Thirteen issuers do give new cardholders the entire duration of the promotional rate offers to make eligible balance transfers, but waiting to the last minute to make a transfer negates the benefits of a limited 0-percent offer time frame.
“There is no time limit for when cardholders can take the balance transfer, but the 0-percent offer only lasts for 12 billing cycles from account opening, not from when the balance transfer is taken,” said Kathleen Toy, communications manager for TD Bank, issuer of the TD Easy Rewards Visa card in this year’s survey. “If you wait eight months to start the balance transfer, you would only get four months at 0 percent, after which we would charge the regular interest rate. In practice, almost everyone who takes one does it within a month or two of account opening.”
No fee or low rate: Pick one
Consumers taking advantage of one of the typical no-interest balance transfer rate promotions will likely face a fee for each balance transfer made.
Fifty-four of the 85 balance transfer cards surveyed charge a 3 percent or a $5-$10 minimum fee per balance transfer, whichever is greater. Another 15 cards charge 4 percent or a $5-$10 minimum. Four cards charge up to 5 percent of each transfer. The fee is charged immediately, but most major card issuers don’t require it to be paid upfront or in the first month. Instead, it is rolled into the total owed.
|Cards with no balance transfer fee|
Ten cards in this year’s survey do not charge balance transfer fees; however, in most cases, you can have a low fee, or a low rate, but not both. Only one of the cards in our survey, the Capital One QuicksilverOne Rewards card (average credit), currently offers a 0-percent promotional balance transfer rate and no fee to new customers.
According to Capital One spokeswoman Amanda Landers, the bank’s focus is on creating simple products with hassle-free rewards programs, something it feels consumers look for when selecting a new card. Typically, when Capital One offers a 0-percent introductory rate, it does charge a 3 percent transfer fee like most issuers, she said.
Another no-transfer-fee card, Pentagon Federal’s Promise Visa, discounts its rate to 4.99 percent. The rest accept balance transfers fee-free, but don’t discount their APRs, which can range from 12.90 percent to 24.90 percent.
In most cases, consumers are better off with a 0-percent introductory transfer rate and paying the typical 3 percent fee, according to Weeks.
“Balance transfers to a 0-percent account nearly always make sense,” he said. “If you get your balance down to zero before the interest offer expires, even with a 3 percent fee the costs will likely be much lower than any interest rates you would have been paying otherwise.”
Ten cards from this year’s survey offer new cardholders a tiered balance transfer fee, featuring one fee initially, then a higher one later. Most of the 10 cards start out with a 3 percent fee, then later boost it to 4 percent or 5 percent, but one — Slate from Chase — starts out fee-free for 60 days, before jumping to 3 percent.
According to Chase Card Service spokesman Rob Tacey, Chase’s goal with such offers is to help consumers affordably manage their spending. “Low rate introductory or promotional offers are options that Chase makes available to help customers reduce how much interest they pay,” he told CreditCards.com via email. Chase Blueprint products in particular — which includes the Slate card — are “designed to help customers save on interest and pay down their balances or large purchases faster.”
Look for a long-term fit
To get the most out of a low-to-no interest balance transfer offer, credit experts recommend researching and planning ahead.
“Read the fine print and see what fits down the road, not just right now,” Weeks said. “The ultimate goal should be to pay down debt and remain as debt-free as possible.”
The 2015 Credit Card Balance Transfer Survey of 100 U.S. credit cards was conducted Dec. 10-16, 2014, by CreditCards.com. The 100-card survey pool is the same group of cards used to calculate CreditCards.com’s Weekly Rate Report, and 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. See related:2014 balance transfer survey: Beware combo deals, two-tier fees, Mom offers daughter balance transfer deal