For many years, no fee balance transfer credit card offers were a popular incentive to get you to apply. But as you probably already know, over the last few years these offers are no where to be seen. A lot of people post on Credit Card Forum asking about these, so here’s a guide to help you find the best deal.
Q: Do no fee balance transfer cards still exist?
A: When the great recession hit, many banks not only stopped these offers, but they also ended balance transfers altogether. Of course the economy eventually recovered and 0% offers came back, but they all had fees attached to them. Unfortunately this continues to be the new norm – charging a fee. I do not know of a single no fee balance transfer credit card that is currently available.
Warning: The truth is these fee-free offers were largely a bait-n-switch. Card issuers would frequently advertise them and then change the terms later on, by shortening the 0% period or eliminating it altogether. Due to the new laws we now have more transparency so the jig is up.
Q: Will they make a come back?
A: They say “never to say never” but when it comes to the practice of charging balance transfer fees, unfortunately it looks like they are here to stay. Why? Because the reform which went into effect in 2010 completely changed the way credit card companies do business. Basically, they are being held accountable and can no longer do their bait ‘n switch offers.
So the banks have to hold up to their end of the bargain and honor your introductory interest rate for at least the first year. In turn, most of them have since turned to other ways to make money on transfers – upfront fees and shorter 0% periods. While this may seem like a bad thing, the benefit is that credit card balance transfer offers are much more transparent… now they have to give you what they advertise.
Q: How much are balance transfer fees nowadays?
A: Most major credit card issuers tend to charge 3% to 5%, but I would say the majority are 5% and the ones for 3% are quickly disappearing. It’s important to take these fees into account when calculating out the potential savings on balance transfer cards.
Q: How can I get the best transfer offer today?
Since no fee balance transfer cards are no longer an option, you need to be more strategic in how you choose your offer. Here are three rules to follow:
1. Only accept the longest 0% offers
Taking an offer for only 6 or 9 months just doesn’t make sense, because that means you would be paying the credit card transfer fees twice in one year. So now you need to be picky and go for the best offer you can get.
2. You need to transfer the balance to a different issuer
Every financial institution that I know of does not accept balance transfers internally – i.e. You can’t signup for a new BofA card and use its transfer offer to move the balance you have on an existing BofA card. Instead you need to switch it to an entirely different bank – like moving it from BofA to a Discover card.
3. Watch out for annual fees
Surprisingly more and more cards these days are charging annual fee. Although balance transfers with no fee are a thing of the past, credit cards with no annual fee are still an option… so make sure there isn’t an annual fee hidden behind that seemingly great balance transfer offer.