Can Credit Card Balance Transfer Help You

Transferring a credit card balance used to be so easy and painless that some consumers referred to it as a game: Sort through a stack of offers, find the best deal and you win. Now, fewer offers, shorter introductory periods and higher fees make finding a good balance-transfer deal much more challenging.

The availability and attractiveness of the terms of balance transfer offers has taken a downturn right along with the economy — but card issuers also point to federal credit card legislation, passed in May and slated to take full effect next year, as the reason for even more changes.

The largest credit card issuer in the country, cited the new federal regulations when it sent letters to its customers informing them that the bank will increase its maximum balance transfer fee to 5% — the highest charged by any issuer. Subsequently, the company stopped including balance transfers in most of its new offers. 

The standard balance transfer fee had been about 3% — and some issuers also limited the total fee, often to less than $100, with caps. . It is possible to find better deals, but it takes work.

Here are some steps to take if you’re looking for a balance-transfer deal

1. Go to online forums and get feedback from customers of the issuer you’re considering. “Do a little homework on the company. Check and see how they treat their customers,”

2. Read the fine print to make sure you’re getting the deal you think you’re getting. Some card issuers now advertise a certain introductory period — say, a year — and introductory interest rate — say, 0% — but the fine print specifies other periods and rates for those with less-than-stellar credit.

3. Pay attention to the APR on purchases, not just to balance transfer terms. Until the new federal rules kick in, in February 2010, any new purchases at a higher interest rate probably will be buried under your lower-rate transferred bala4. Consider keeping your old card open if you do transfer a balance to a new credit card — unless you’d be tempted to rack up a new balance on itnce.

5. Don’t assume that interest rates or other terms will not be changed by the issuer in the future. For example, Chase recently increased minimum payments for some customers by 150% — and many of those affected had low-interest deals for the life of a balance transfer.

That might trip up some customers who can’t afford the new, higher payments, possibly causing them to be late or miss a payment and, in turn, causing that low interest rate to skyrocket.

“During that 12 months, or whatever the introductory period is, the issuer typically cannot change the interest rate or minimum payment,” Randel says. “After that, they can do whatever they want — and worse, if you miss a payment, the game is off.”