Consumers shopping for credit card balance transfers can find
plenty of good deals this year, but may also encounter new tweaks
that can turn these money-saving offers into financial burdens, the
2014 CreditCards.com annual balance transfer survey shows.
Most notably, the 2014 CreditCards.com annual survey of 35 top
balance transfer cards shows "combo offers" have become the norm.
These offers, found in 32 of the 35 cards, not only allow balance
transfers at 0 percent, they let borrowers charge new purchases
interest-free, too. That can entice cardholders to rack up, rather
than pay down, debt.
"The bank's betting that you're not going be able to pay it off
on time or that you're going to start spending again," says
Joe Valenti, director of asset building for the Center for American
Progress, who researches credit cards.
The survey also found:
Longest intro periods vanish.
The extremely long 0-percent introductory periods that were
available a few years ago no longer exist: Card issuers have cut
back introductory periods for the second straight year. The
longest intro period this year was 18 months, down from the 21
months offered by several issuers in 2012. That's bad news for
consumers who need extra time to pay off a big balance.
However, the shortest intro periods are now
Card issuers have gotten more generous on the opposite end,
increasing the duration of the shortest introductory periods by
three months. The briefest introductory period offered this year
was nine months, up from the six months offered by five cards
Two-tier fees ratchet up after intro period.
A 3-percent balance transfer fee remains the norm, but consumers
need to watch out for a new trend. More issuers now offer one
balance transfer fee during the introductory period, then switch
to a higher one. This year, one card offered a $0 fee for 60
days, then 3 percent. Eleven cards charged 3 percent, then 4
percent later. And three cards charged 3 percent, then hiked the
fee to 5 percent after the promotional period.
CreditCards.com has surveyed a representative sampling of
balance transfer deals from big issuers since 2010. This year's
sample includes nearly all the same balance transfer cards as last
year. In the few cases where a card was no longer offered or no
longer had introductory pricing, we included a similar card, from
the same issuer if possible.
The survey helps consumers compare a feature of credit cards
that, used wisely, lets them buy time to pay down debt at a lower
cost. The offers dwindled during the recession, then roared back
after. "Balance transfer offers were on the rise in the first
couple of years post-recession, and they've stayed constant since
then," says Lisa Hronek, a credit card industry analyst for Mintel.
"The industry has found something that's working."
These offers work well for some consumers, too. Experts say they
can be a good way to get relief from a high interest rate and pay
down a balance quickly. Balance transfers aren't for everyone,
though, says Valenti. In a worst-case scenario, a balance transfer
can backfire and a consumer who was struggling can wind up even
deeper in debt, he says."Balance transfers work really well for
some people, but can be hit or miss for a lot of others."
That can be especially true of the combo offers, Valenti says.
They can be a double-edged sword because, if you're looking at a
balance transfer offer, you likely already have credit card debt
that concerns you. So what happens when you add an incentive to
purchase more on plastic? "That makes it very easy to rack up more
of a balance on the new card," he says.
Common offer: 1 year, 0 percent
Consumers who want to take advantage of the current spate of
balance transfer offers have plenty of choices. (See chart below
of balance transfer offers
.) All but a few of the cards surveyed offered 0-percent
introductory balance transfer rates.
"About nine out of 10 consumers who get an offer with balance
transfer pricing will see a 0-percent rate," Hronek says.
This year, the most common duration for 0-percent introductory
offers was a year -- three months shorter than last year's 15
One other change: While our
2013 balance transfer survey
saw the demise of the hefty 5 percent balance transfer fee, one
issuer revived it this year, in time-delayed form. Three Wells
Fargo cards charge an introductory balance transfer fee of 3
percent, then hike it by 2 percent for balances transferred after
the introductory period.
However, the standard balance transfer fee has stayed the same
as 2013 -- 3 percent. Of the 35 cards surveyed, 17 cards charged 3
percent, while another 10 charged that amount during an
introductory period, then increased the fee later.
The survey found only one card, Slate from Chase, that offered
both a 0-percent introductory balance transfer interest rate and an
introductory $0 balance transfer fee.
The senior research director at CEB TowerGroup, Brian Riley,
says card issuers can afford to dangle attractive deals in front of
consumers now due to low interest rates, but that might not last
for long. "This could die a quick death if rates go up," Riley
While no one can predict exactly what will happen with interest
rates, they could begin to edge up in 2014. Since the recession hit
in 2008, the Federal Reserve has tamped down the interest rate at
which banks lend money to each other, and that has kept the prime
rate low. Most U.S. credit cards are variable rate cards tied to
the prime, so an interest rate hike by the Fed would have a big
The Fed has sworn to keep hands off rates until unemployment
dips below 6.5 percent, which economists don't expect until after
midyear 2014. A consumer considering a balance transfer might want
to act sooner rather than later, Riley says: "If you're on the
fence, now's a good time to take a look rather than six months from
Tips for using balance transfers
If you shop for the best deal, plan your payments and use restraint
in charging new purchases to get the most out of a balance transfer
deal, experts say. Here are four steps to make a balance transfer
work in your favor:
1. Consider your credit.
Not everyone can qualify for an attractive balance transfer offer,
Riley says. If you have a
above 700, you should be able to get a good deal, Riley says. Your
chances decrease as your credit score does. "Once you get below the
620 range, your chance of getting a good balance transfer offer is
very limited," he says. Consumers with lower scores, if they can
get approved, might be less likely to get a high enough credit
limit to transfer their full balances, he says.
2. Do some comparison shopping.
Some consumers see 0 percent for a certain length of time and look
no further. That's a mistake. "You have to look at the terms of the
offer as a whole," Riley says. For example, compare:
- The post-introductory balance transfer interest rate. Unless
you're 100 percent sure you'll pay off your entire balance while
you still have 0 percent, you need to consider this interest
rate, Valenti says. While the
typically varies based on creditworthiness, looking at the range
can help, Riley says. Some issuers have a wide range of possible
interest rates, and it can be hard to know which one you'll get.
Unless you have stellar credit, it might be wise to pick an
issuer that has a narrower spread of possible rates, Riley
- The value of other sign-up perks. Some cards offer additional
perks to sweeten the deal. For example, Riley says some rewards
cards with introductory balance transfer rates also offer sign-up
bonuses of points or miles that can be worth $500 or more if you
meet a certain spending requirement in a certain time frame. He
says: "Some issuers are very generous."
- Other costs of the credit. "Look at the whole cost of
managing the card," Riley says. One example: Is there an annual
fee? Of the 35 cards surveyed by CreditCards.com, only five had
an annual fee, ranging from $25 (waived the first year) for the
PenFed Visa Platinum Cash Rewards Card to a $495 annual fee, plus
$195 for each authorized user, for the Visa Black card.
2. Figure out if you can pay off your debt on
One big question to ask: will you be able to pay off your debt
during the introductory period? It's important to look at your
household budget, figure out how much you can devote to repayment
and see if it's enough to knock out your debt, Valenti says.
3. Stop spending on plastic.
A major pitfall of balance transfers: your old card is suddenly
empty, and it can be tempting to spend. To eliminate that
possibility, Riley recommends closing your old account, despite the
hit your FICO score would take due to the reduction in available
credit. How about just cutting up the card or hiding it? "People
promise themselves they will keep the old card in the junk drawer
and not use it, but you often don't see that play out
successfully," he says.
4. Follow the rules to the letter.
Read through the terms of your offer carefully and make sure you
follow them, experts say. If you fall behind on payments or break
another rule, you could get your 0 percent yanked and replaced with
a penalty interest rate that could make you worse off than you were
before the transfer. "Penalty APRs are still hovering at pretty
astronomical rates in the 28 percent rage," Riley says.
2013 survey of balance transfer offers