Balance Transfers Not Only Way To Handle Credit Card Debt

    A familiar adversary for American consumers – credit card debt – is re-emerging as a factor in the U.S. economy and so is one of the most enticing offers that come with it: free balance transfers.

    The two were a hot couple in the run-up to the Great Recession when credit card debt topped out at $1.02 trillion in 2008. Free balance transfers threw a lifeline to people having trouble paying off their cards, but it had a short shelf life. The offers vanished when the economy shrunk, credit tightened and consumers cut back dramatically on card use.

    Now, however, the economy has recovered well enough to encourage consumers to pay with plastic again. Confidence is building and so is credit card debt. According to the Federal Reserve, revolving debt, which consists mainly of credit cards, reached $887.9 billion at the end of 2014, the highest total in almost five years.

    Card companies saw the opportunity to tempt profligate spenders with new offers that are even more attractive this time. Some of the perks include:

    • Zero percent APR on balance transfers for up to 18 months
    • Zero percent transfer fees for 60 days
    • Zero percent APR on purchases for up to 15 months
    • No annual fee
    • No late fees

    Will It Help Pay Off Your Debt?

    Those are enticing options for any consumer. One calculator said that if all those conditions were applied to a card owner who owed $10,000 and was paying that national average of 14.9 percent interest, credit card refinancing would save the owner $2.250 over the length of the balance transfer promotion.

    Who wouldn’t want that? Maybe you.

    “Any strategy related to credit card utilization should include a plan to become debt free, not just transfer the debt from one card to another,” Rick Bugado, Director of Industry Relations for the Association of Independent Consumer Credit Counseling Agencies, said. “Taking such an offer to reduce interest rate is an excellent aid in becoming debt free, but the consumer should continue to make payments higher than the minimum monthly payment and restrict spending until they are out of debt.”

    The problem with the new promotions is none of the cards contains all the perks. Visa, American Express, MasterCard and Discovery, the prime players in the industry, have a few elements of those offers in their promotions to help them gain new customers, but none of them offers everything.

    Credit Scores A Factor

    That is one of several reasons card owners should pause before jumping. The most appealing perks are only for “choice” customers, meaning those with excellent credit scores. If you’re not batting around 700 in the credit score game, you may not be eligible for a “zero-percent transfer” card.

    There also is the matter of transfer fees. Only a few cards offer free transfers. Most charge three percent of the balance, meaning a $10,000 transfer, would cost you $300 in fees, right away.

    Time limitations are another factor to examine. The offers typically allow 12-to-18 months to pay off the balance you transferred at zero percent. If you don’t pay it off, interest rates between 13 and 25 percent apply, again depending on your credit score.

    There also is the matter of purchases made with the new card and the interest rate that will be applied to those purchases. Some cards offer zero percent for between six and 15 months on new purchases, before applying the usual 13-to-25 percent interest rates. Most apply those interest rates immediately.

    Consider All Options

    Still, there is some merit in switching to a zero-fee balance transfer, especially if you have multiple credit cards. Consolidating credit card debt on one card could simplify things. One card, one payment, one interest rate – with a 12- or 18-month deadline – may force you to focus on the task at hand.

    “If the consumer is able to afford the current payments and just looking to reduce the interest burden, they could certainly consider transferring the balance,” Bugado said. “They might also consider finding another source such as a home-equity line of credit. However, they should consider the potential impact to their credit score before opening any new accounts.”

    If you’re not in the “excellent” credit card score category, a more workable solution might be debt consolidation, credit counseling or a call to your card provider.

    “If the consumer can’t afford the payments, credit counseling or contacting the card issuer is the best way to see if they qualify for some relief before looking into balance transfers,” Bugado said.


    Bill Fay
    Staff Writer

    Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it seven years ago, helping birth into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering college and professional sports, which are the fantasy worlds of finance. His work has been published by the Associated Press, New York Times, Washington Post, Chicago Tribune, Sports Illustrated and Sporting News, among others. His interest in sports has waned some, but his interest in never reaching for his wallet is as passionate as ever. Bill can be reached at

    In debt? We can help!

    • Amount
    • Type
    • Contact

    How much do you owe?

    What can we help you with today?

    Related Articles

    Image of a new credit report

    How the New FICO Credit Scoring System Will Affect You

    The announcement that FICO will put two new credit scoring models – FICO 10 and FICO 10T – into play this summer is the ultimate good news/bad news situation for consumers.The good news is that if you have a score anywhere above 680 – and continue ...

    Continue Reading
    Credit report next to a laptop to freeze credit checks

    New Law Allows Credit Freeze

    Security breaches have become so commonplace in the United States that news around them barely causes a ripple these days.Even if it’s news that provides consumers an extra layer of protection and won’t cost them a dime.The Economic Growth, ...

    Continue Reading
    Women with bad credit going to nonbank to borrow money

    Nonbanks Fill Demand from Borrowers with Poor Credit

    The era when almost anyone with a pulse could get a loan or mortgage from a commercial bank ended with the financial meltdown of 2008. Today, tightened regulations and a reluctance among large lenders to deal with risky customers has shifted borrowing to ...

    Continue Reading
    Warning Card Interest Rates Up

    Interest Rates Increasing on Credit Cards

    American consumers owe a record $1.023-trillion in revolving credit - mostly through credit-card debt - and with interest rates expected to rise in 2018, financial experts predict the problem will escalate unless consumers take a more aggressive approach in ...

    Continue Reading
    Equifax Data Breach Lady in front of computer screen

    What To Do About Equifax Data Breach?

    The recent data breach at Equifax, one of the three major credit reporting bureaus, has created an uncomfortable situation for the more than 145 million American consumers whose personal information has been exposed.What do I do to limit damage from the ...

    Continue Reading
    Poor Credit Report

    CFPB’s Deal with Credit Bureaus Could Raise 12 Million Scores

    The Consumer Financial Protection Bureau, which prides itself on being the watchdog for U.S. consumers, has been snarling at America’s three major credit bureaus for a while and finally decided to take a bite out of their bottom lines this year.The CFPB ...

    Continue Reading
    Scanning the EMV Card

    Walmart Ahead Of Competitors With EMV Cards

    While most retailers in the United States struggle to catch up to the new EMV chip technology for credit cards, Walmart has been ready for nearly a decade.The nation’s largest retailer installed machines that could read the chip-embedded EMV cards nine ...

    Continue Reading
    credit score

    Want To Know Your Credit Score? CFPB Makes It Easier

    Almost everyone is in on making credit scores easily available to American consumers.Everyone except the consumers, that is.At the urging of the Consumer Financial Protection Bureau (CFPB), credit card companies, credit reporting agencies and ...

    Continue Reading
    Get Help Now

    Overwhelmed with debt? You have options for lower monthly payments!