Are We Seeing The Demise Of The Balance Transfer Credit Card?

by : Jon Francis

A few years back, credit card companies realized that they reached nearly every potential new customer. In order to keep increasing their market shares and their profits, they were going to have to entice people who already had credit cards to jump ship from their old companies and apply for a new credit card with them. Thus was born the concept of the balance transfer credit card. Balance transfer cards offer consumers the chance to reduce their monthly payments and total repayment amount on their current account balances by giving them a lower rate of interest - often 0% interest - on any balance transferred from another credit card.

These cards proved to be far more popular than the card issuers expected. Consumers figured out fairly quickly that they could shift balances from one card to the next, moving on to another 0% transfer card when the low interest rate on their last balance transfer card expired. Rate tarts, the term coined for people who moved their balances to avoid paying interest on their carried over balances, shook the credit card companies and encouraged them to start placing some restrictions on their offers.

Originally, the companies thought that people would transfer their balances to a new card, and use that credit card in preference to others. Under that scheme, the card companies would lose out on the interest on the transferred balance, but would make up for it in interest rates and merchant fees on new purchases. Unfortunately for the companies, today's consumer has the benefit of the internet with comparison sites to help them work their way through the complexities of credit card finances and loans. Many consumers transferred their balances to a new card, but didn't use the card to make new purchases.

In response to that, the credit card companies began placing limits and restrictions on their balance transfer offers. This has let a lot of people to believe that we are seeing the demise of the balance transfer credit card. In reality, the concept of offering lower interest for moving your carried account balance hasn't died - it's simply undergoing a metamorphosis to make it more friendly to the credit card companies.

That means, of course, that it's less friendly to consumers, who now have to shop a bit harder to get a good balance transfer deal. Those deals can still save you a lot of money, though, so it's important to keep your eye out for them. You'll also need to watch out for some of the tricks and traps that credit card companies are building into their offers now to discourage rate tarts. Before you apply for a balance transfer credit card, look closely at the member agreement so that you know:

-What is the APR for transferred balances?
-What is the balance transfer fee for the transaction?
-How long will the new APR apply to my balance transfer?
-What is the APR for new purchases made to the card?
-Do I have to whack a certain amount or number of new purchases on my card to keep the low APR on my balance transfer?
-Is the balance transfer fee more than the amount of interest that I'd pay on the transferred balance over the same amount of time?
-What will invalidate my balance transfer offer?

If you're looking for a way to lower your monthly payments, or cut down the total repayment on your credit card bills, a balance transfer card could be the answer that you need. Check out new balance transfer offers at comparison sites on a regular basis so that you'll never have to pay more interest on your accounts than you should.