Three Ways to Make the Most of Balance Transfer Offers

Posted by  on Feb 08, 2010

Stringent new credit card regulations are on the horizon, forcing banks to rethink how they can use special offers to lure new customers. For years, balance transfer deals have allowed Americans to surf credit card debt from one bank to another. Cardholders with good credit scores often qualified for zero-interest offers with very low transaction fees. However, banks are under pressure from government agencies to reduce consumer credit lines while keeping more cash on hand for emergencies. This means some major changes are coming to balance transfer offers:

  • Industry analysts have already observed banks reducing the number of balance transfer promotional offers sent to pre-approved prospective customers
  • Experts predict that banks will send more low interest rate offers, phasing out zero-interest balance transfers for everyone except those Americans with the highest credit scores
  • Bank officials have gone on record about their need to generate more fee-based revenues, resulting in higher balance transfer initiation fees

Three new strategies can help you make the most of balance transfers under these new rules:

  • Find balance transfer offers with low transaction fee caps. If you intend to consolidate some larger balances, look for opportunities to trigger transaction fee limits. Caps of $100 or $125 may sound high, but can still save you money when moving large amounts between banks
  • Consider a balance transfer between existing accounts. After February 2010, banks must apply your monthly payment toward the portion of your credit card debt with the highest interest rate. If you have a balance of $2000 at 19 percent, transferring another $3000 under a 2.99 percent offer can allow you to quickly cut down your finance charges
  • Manage multiple accounts carefully. Under new rules, most Americans may benefit more from calibrating balances across a few older accounts than from opening new accounts. Balance transfers can help you hit the sweet spot of 30-50 percent credit utilization

Remember to compare offers carefully before you apply for credit cards. Ask your existing lenders about balance transfer opportunities or other ooney.cnn.comffers that can match those of their competitors. And always make your minimum monthly payments on every account. While new rules prohibit universal default clauses in your lending agreement, they do nothing to prevent banks from withholding special offers if your credit report shows late payments.

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