Balance transfer offers have held steady over the past two years, but issuers may get less generous as interest rates rise.
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Editor’s note: See later story, “Balance transfer deals hold steady despite rate increases”
Balance transfer offers have held steady over the past two years, according to a CreditCards.com survey of 100 major cards. But with interest rates rising and offers continuously changing, balance-carrying cardholders should start shopping around to find the best deals.
This year’s analysis of online balance transfer offers revealed the terms that were most common in late 2015 – when we last conducted a balance transfer survey – are still prevalent today. Most balance transfer cards offer 0 percent interest for 12 months at a 3 percent fee. However, a closer look shows the details of some promotional offers are being revised, and that may continue. For instance, of the 97 cards we surveyed in 2015 and 2017, 25 revised their balance transfer promotional offer terms. Additionally, fewer cards offer promotional rates for 15 months or more (13 this year compared to 16 in 2015).
Our survey of a market-representative group of 100 credit cards found:
- Transfer options are still common. Eighty-nine of the 100 cards surveyed allowed balance transfers, and 42 of those cards encourage transfers with temporary interest rate cuts. In 2015, 88 cards offered balance transfers and 44 advertised rate cuts.
- Zero-percent deals are plentiful. As in years past, there are many 0 percent balance transfer offers to choose from. Thirty-eight of the cards surveyed this year offer 0 percent teaser rates to new members. Four other cards offer below-average balance transfer rates (between 2.99-10.99 percent) for a limited period.
- Transfer fees are just part of the deal. Fifty-five out of 89 balance transfer-capable cards charge a 3 percent fee, with a $5-$10 minimum. Only 12 are free of fees, and five of those are issued by Capital One. Two cards in our survey – both issued by USAA – offer a $200 cap on transfer fees. The promotional offers of four cards – three from Wells Fargo and Chase’s Slate card – include an introductory rate and a transfer fee discount.
- The interest-free promo period is your friend. The interest that you pay after an introductory period expires can vary wildly – from 8.24 percent to as high as 27.24 percent for the cards in our survey. The average standard APR for the 89 balance transfer cards is 18.45 percent. Your balance transfer interest rate almost always depends on your creditworthiness.
|CARDS WITH PROMO OFFERS|
AND FEE DISCOUNTS
|The following cards offer promotional balance transfer rate deals and introductory fee discounts.|
Rate hikes making 0 percent offers scarce?
A 0 percent balance transfer offer can result in big savings if the balance is paid off within the promotional period. With a standard average APR above 18 percent for balance transfer cards, going even a few months beyond an interest-free period can cost hundreds in additional charges – depending on the remaining balance.
The Federal Reserve raised interest rates in December 2015 and December 2016, and several more rate hikes are expected in 2017. Some analysts think this could result in less generous offers for balance transfers, in addition to higher APRs.
“I think there will be fewer 0 percent offers and the offers will be of shorter duration,” said Moshe Orenbuch, industry analyst at Credit Suisse. “Promotional rates that aren’t 0 percent might even be higher. So far, it’s only been half of a percent, so I don’t think it’s that big of a deal yet. If in the next six to nine months we see a couple more [rate hikes], then that will start to add up.”
Consumers who look to balance transfers to wipe out large debts won’t see their options completely disappear, however, said Brian Riley, senior analyst at Mercator Advisory Group.
“I don’t think ongoing rate increases will kill balance transfers,” said Riley. “If anything, it’s a better reason to have them. It’s attractive to people who want lower rates now.”
|CARDS WITH NO BALANCE TRANSFER FEE|
|Many credit cards charge a 3-5 percent fee to transfer a balance, but these cards let you do it for free.|
Have a plan – don’t just rate shop
Although temporary lower interest rates can be enticing, financial advisers urge consumers not to use balance transfer cards simply to free up a credit line on an existing card. A balance transfer is much better suited to reduce your overall debt burden at a lower cost within a specified time period.
“I always want a client to come at this as ‘I’m dedicated to making a change’ or ‘I’m working toward X goal,’” said Ryan Frailich, a financial coach and planner at Deliberate Finances in New Orleans. “I’d rather that be the case than them coming from the position of ‘Oh, I can get a lower rate,’ because that can encourage the debt cycle to continue.”
Card issuers don’t just throw balance transfer offers around, willy-nilly. Mercator Advisory Group’s Riley said large banks typically make their best offers at specific times during the year. If you’re not under a time crunch, it may be wise to plan your balance transfer in the first half of the year.
“The typical large card issuers know that people start trying to pay their balances down and are getting their tax refunds in the first and second quarter of a new year,” Riley said. “That’s the perfect time to send out balance transfer offers.”
While consumers with good or excellent credit ratings tend to get 0 percent balance transfer offers, it isn’t always the case.
“When you look at the big issuers, they are considering many factors,” Riley said. “For example, if you are typically a revolver and your balance runs close to the credit line, they are probably not going to send you one of those [0 percent] offers.”
If you are fortunate enough to get a no-interest offer, you can normally expect a 12-month window to pay it off. There are some outliers, however – Citi’s Diamond Preferred card allows a generous 21 months to pay down a balance without interest. The Barclaycard Visa with Apple Rewards card allows 18 months, and several others have 15-month 0 percent promo periods.
Cardholders typically have a limited time to execute the balance transfer at the promotional rate. Of the cards surveyed, 39 give new cardholders 90 days or less to make introductory-rate-qualifying transfers. Others are in much less of a hurry to get you started – the Comerica Visa Platinum card, for instance, allows a whole year (366 days) to make a transfer and still qualify for its introductory offer.
Lesser-known limits of balance transfers
Interest rates and fees are typically the most important factors when choosing the right balance transfer card. However, many of them contain restrictions and rules that you wouldn’t be aware of without a close read of their terms. For instance, 72 cards in our survey explicitly prohibit shifting a balance between two cards from the same issuer. The same number of cards have no grace period, meaning interest charges kick in immediately, unless you’re in a no-interest period.
Here are a few other lesser-known limitations:
- You may have to wait several days. Sixty-five cards surveyed note that balance transfers may not be processed until a couple of weeks or so have passed. To minimize interest charges, plan your balance transfer well in advance of your existing card’s next statement date.
- You may not be able to transfer all your debt. Thirty-four cards surveyed have some sort of limit on how much you can transfer. For example, most Chase cards allow transfers of no more than $15,000 or your credit limit (whichever is lower). And 13 cards have a minimum transfer requirement (typically $50-200). This means you may not be able to transfer all of your high-interest debt, or any of it if the balance is too small.
- You may not find it “rewarding.” Balance transfers typically don’t allow cardholders to earn reward points or cash back on the amount transferred.
Balance transfer cards are great financial tools, but like any complex product in any marketplace, making the right decision takes a little research. If it seems like information overload, keep in mind that due diligence now can spare you financial stress in the future.
The 2017 Credit Card Balance Transfer Survey of 100 U.S. credit cards was conducted in January 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.