The new legislation promoted by the Federal Reserve to protect credit consumers is not scheduled to go into effect until July, 2010. Until then, consumers are very likely to experience various attempts by credit companies to maintain and increase their revenues. For example, Bank of America has recently announced that it is going to raise its balance transfer fee from 3% of the amount transferred to 4%. This measure will not significantly affect sub-prime borrowers that do not usually qualify for balance transfers anyway. However, it will certainly hit those consumers with an excellent credit history who rarely pay any fees and who generally have credit card interest rates of less than 10%.
Increasing credit card charges has become a common way for banks and credit companies to attempt to reduce their large losses resulting from the high unemployment rate and weak economy. Following Bank of America’s lead, Discover Financial Services are also planning to raise their balance transfer fees from 3% to 4%. While a 1% fee rise may not seem that large, it is actually quite significant when it is applied to the transfer of a hefty credit debt, and due to the increasing cost of living, such extra expenses can be very frustrating and draining.
Bank of America is attempting to soften the effect of the higher balance transfer rate by backing down on its stated intention to increase overdraft fees from $35 to $39. Plus, the bank announced its plan to waive three months of credit card maintenance charges to help some unemployed customers keep up with their payments. Unfortunately, these assistance measures will do nothing to benefit working consumers that have a good to excellent credit history.
Can you avoid paying the new 4% balance transfer fee? Only if you successfully negotiate a fee reduction with the bank or find a different bank to make a transfer to. If you are a creditworthy customer of Bank of America, you can try asking its representative to allow you to transfer debt at the previous interest rate. If the issuer does not improve their fee, you can simply look for another card issuer that offers 3% on balance transfers. Fortunately, the majority of major banks still charge 3% on their balance transfers and have not yet announced an intention to raise their fees.
If you cannot avoid paying the higher balance transfer fee, consider other methods of keeping your credit card expenses low. For example, apply for a balance transfer card only for the purpose of eliminating any high-interest rate debt. Do not make any new purchases with the card. If you do, you’ll have to pay different credit card APRs that apply to purchases and balance transfers which may overwhelm your ability to keep making regular payments. Also remember that if you pay your balances off in full within the grace period, you are not charged any interest at all.