Balance Transfer Deals Become More Expensive

Festive  season has always been the most profitable period for retailers. Many people pull out their plastics to buy presents for friends and relatives, delicious food for Christmas dinner and new decorations for their homes. Christmas shopping spree makes customers spend more than usual. A credit card is a very tempting proposition to buy things now and pay for them later. However, one day you will need to start paying your debt. Do you want to take advantage of balance transfers offers? You can be disappointed to find out that the days of generous balance transfer cards may have gone.

Many people are under-utilizing their plastic - a potential source of free money. The holiday blues could kick in very quickly when unwelcome charges appear on your credit card statement. If you are drowning in high rate debt, balance transfers offers may become your helping hand. They let you put an instant freeze on your interest payments and attack your outstanding debt. But as banks themselves face the consequences of the credit crisis, they are making those deals more expensive.

Balance transfer cards were once an excellent financial tool for banks to snag new customers. The standard offer provided a 0% APR on balance transfers for 12 or even 15 months. Banks did not charge a balance transfer fee or capped it. However, nowadays you can hardly find such offers on the market. If you want to move your debt onto another plastic, be ready to pay for it. We found four changes that can increase your borrowing costs.

The first change is that lenders have added a balance transfer fee. Initially, it was 3% of the amount you transferred - up to $90, depending on the card. Nowadays, the fee still remains 3%, but many issuers have removed their caps. For example, Discover doesn't cap its balance transfer fees any longer. This change affects all consumer cards, including extremely popular Discover More card. Some time ago the bank charged a 3% fee with a $10 minimum and a $75 maximum.

Secondly, the length of the interest-free period may be based on the applicant's FICO score. It may be as short as three months. For example, someone with excellent rating might be able to get an attractive rate for 12 months whereas people with fair score might only get it for six months.

Many banks cancel low rates for the life of the balance. Instead, they charge 2.99-3.99% for up to 12 months. For example, American Express provided a fixed 4.99% APR on balance transfers for the life of your transferred amount with its Blue and Blue Cash® cards. However, the bank has changed the terms of these offers. On September 19th, American Express has cut down the introductory period of its fixed interest rates on balance transfers from life to 12 months. Now Blue and Blue Cash® from American Express provide 2.99% fixed APR on balance transfers for 12 months.

Finally, some lenders are limiting the amount of money that a consumer can transfer from one card to another. If you have a large debt, you should lower your expectations on how much money you will be able to transfer. You may only be able to transfer a part of your debt to a new plastic.

Will the balance transfer deals with a zero APR completely disappear? No way, because they are a strong marketing tool. People prefer plastic with introductory rates. So it makes sense to keep 0% deals alive, as long as it is financially viable. Unfortunately, balance transfer offers will provide less attractive terms than they used to.