0% Balance Transfer Card Applications - Looking into the Future
A few years ago every second creditworthy person was offered an irresistible 0% APR balance transfer application. Approval promised great benefits, other than just saving on a higher interest debt payoff. Accompanying perks and enticing features such as no annual fees and rewards seduced a consumer into a spending catch. The opportunity to make free money out of the 0% balance transfer deal gave a great field of action to savvy cardholders and drew them into the arbitrage game. Thousands of dollars of net profit as a result of the arbitrage was really free and easy money as long as the basic card rules were followed.
The weakened economy and banks' reduced earnings made a hit to those lucrative 18 months 0% intro APR offers and prompted introducing balance transfer fees set at 3% of the amount transferred. Also, the dropped volume of balance transfer offers stirs concerns among more knowledgeable customers who doubt their bright future.
Financial experts say the only reason for 0% APR balance transfer cards to lose their volume is the hard time banks and companies are facing with all those tighter credit rules, bankruptcies, foreclosures and debt collection costs. Some major issuers are already cutting back or making less accessible their most lucrative rewards programs. Now, it's time for balance transfers.
The successful arbitrage is a profitable game for the customer, not the bank. The bank does not generate much greater revenue as compared to the cost of securing the transfer, so they either have to raise the fees or cancel the option altogether. If the tendency continues, balance transfers may lose their profitability and luster in the end.
The past year saw a decline in 0% balance transfer offers as well as shortened 0 percent teaser periods. The longest intro period of 18 months was first reduced to 9-12 months with subsequent lowering to 6 months on some cards this year.
While 0% rates are preserved, almost all issuers have started to charge a hefty fee for the transfer. Currently, it is 3% of the amount transferred with the minimum of $5-$10 and no cap to the maximum. If say, you transfer a $10,000 balance onto a 0% APR card you'll be hit with a $300 transfer fee.
This has made balance transfers literally unprofitable for savvy customers used to making revenues with the credit arbitrage. Lots have turned to other ways for additional cash.
There are still some issuers that do have a fee cap. If you're interested, they are three business credit lines from Advanta Bank online - Advanta Platinum Small Business, Advanta Platinum Business Card with Unlimited Rewards and Advanta Kiva Business Card offer. Charging only a $90 transfer fee, they have a 15 month introductory period, which makes the arbitrage quite possible.
Some Discover Card offers charge a maximum of only $75 but impose strict time limitations for balance transfers (read the fine print).
Analytics anticipate there will be even smaller supply of beneficial balance transfer applications on the market. All of them will preserve their major eligibility requirement - excellent credit. If you do, we advise you apply for the 0% APRs to pay off high interest debt or profit from the arbitrage game before balance transfers become a thing of the past.