Credit Card Balance Transfers Are Back — With a Catch

stack of junk mail - credit card balance transferBefore lenders battened down the hatches of the credit market, it was common to receive credit card offers that promised a low or even no-interest period on balance transfers. When the economy took a dive, many experts predicted that these offers had gone the way of the negatively-amortizing adjustable-rate mortgage: disappeared for good.

As it turns out, though, balance transfer offers are a good way for card companies to pick up new customers. Issuers are loosening the purse strings again, and they're once again offering special deals on balance transfers to coax more people into becoming cardholders.

A survey by of 38 cards that offer balance transfers reveals to what extent those 0% offers are returning -- and what's different this time around.A related study conducted by the Safe Credit Cards Project at the Pew Charitable Trust came to similar conclusions: Low balance transfers are back, but savvy consumers should look past the dramatic teaser rate and figure out what they're really going to pay for the privilege.

For instance, says Ardie Hollifield, co-author of the study and project manager with Pew Health Group (a division of Pew Charitable Trust), researchers determined that, among banks, 99% of them had a minimum balance transfer fee, but only 1% had a maximum fee (credit union card offers fared a little better). "They have a floor but no ceiling," Hollifield tells WalletPop.

We've pointed out before the importance of reading the fine print when it comes to balance transfer deals, since there the APRs after the promotional period expires can be sky-high. In addition, most issuers now charge fees for transferring a balance. In fact, of the 38 offers examined by, only one didn't charge a fee -- and that one was for a 7.49% APR, a far cry from 0%. Fees are creeping up, too; the "standard" 3% of just a few years ago has been replaced by 4% or 5%. Among the 38 offers in the study, 23 had fees of 4% or more.

What does this mean for consumers considering one of these offers? Sit down with a calculator and figure out how much transferring a balance will cost you, and determine how you can pay off that balance before the promotional period expires. If you use that card for purchases during the promotional period -- especially if you're only paying the minimum -- you could wind up with a pile of debt once the teaser period ends.
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