The Death of No Fee 0% Balance Transfer Credit Card Offers?
May 21, 2008
The following is the text of an e-mail that I recently received from a reader:
I like playing the 0% balance transfer game and investing the proceeds in an interest-bearing account. However, I’m finding it harder and harder to find any cards with no balance transfer fees or at least caps on their fees… I just haven’t been able to find any new offers with caps on the fees. Is this game essentially dead?
This is a great question, and the sad truth is that it’s getting harder and hard to find no-fee 0% balance transfer offers. In fact, as far as I’m aware, there aren’t any fee-free, 12+ month 0% balance transfer offers out there. Sure, there are lots of cards with no annual fee, and there are even some without a balance transfer fee, but those offers only run 6-9 months.
As far as the issue of capping the balance transfer fee goes, the news is somewhat better. While the industry standard seems to be a 3% fee, and many issuers have removed their caps, others have continued to cap this fee. Probably the best card issuer in this regard is Discover, who offers 0% on balance transfers for twelve months, and their 3% balance transfer fee is capped at $75.
Is the 0% balance transfer game dead? Hardly. While the increase in fees combined with the decreased yields being paid by the best online banks makes it more difficult to turn a profit, it’s certainly still possible to make some easy money.
Here’s the deal… Apply for a 0% credit card offer like the Discover More or Discover Business card. Next, get your hands on the cash from the balance transfer. Finally, plug it into a high-yield, online savings account. Assuming that you’re earning a 3% yield, the transfer fee (capped at $75) will consume your profits on the first $2500. But anything beyond that is yours, free and clear. Just be sure to stay current on your minimum payments and pay off the balance before the 0% promo period ends.
Posted in Credit Card Tips
May 22nd, 2008 at 5:38 pm
If you pay taxes on the profit and you have to draw $ back out of the savings to make minimum payments each month, you may need to start with as much as $4000 just to get past a $75 break even point. I definitely miss the more lucrative days of 5% savings accounts and no-fee offers!
May 23rd, 2008 at 5:55 pm
One tip…. DO NOT cancel your 0 percent cards… i did not do so and I got several offers for a new round… several of these were zero fee balance transfers (this usually was the older cards that I hadn’t used in 2 years). I just re-upped by 0 percent game with several cards (capital one, discover, citi, and advanta)… only the advanta card was new. Maybe they are putting more weight on your individual interaction with the firm vs. new applicants given the soon to be CC credit crunch?
June 2nd, 2008 at 6:35 pm
I just applied for (haven’t received a response yet) a 0% interest rate for 15 months with a 0% transfer fee from Chase. Haven’t seen one of those deals in a long time. The last 0% transfer fee came with a 3.99% for life of transfer from Citi. If you are going to transfer a balance to lower your payments, both of these deals work out great. I hope to pay off one of my credit cards before the 15 month period, but if I can get it with no interest, hopefully it can be paid off in less time.