2015 Balance Transfer Survey: Shop around for best deal
The major parts of balance transfer deals are stable this year, a CreditCards.com survey of 100 major cards finds, and with a Fed rate hike looming, cardholders who carry balances would be wise to lock in a good deal.
This year's survey of online balance transfer offers found that the market norms remain the same as a year ago: The most-common offers let consumers transfer a balance at 0 percent interest for about 12 months for a fee of 3 percent. However, a deeper dive into offer terms reveals the importance of comparison shopping for a new balance transfer card. CreditCards.com found that post-introductory balance transfer rates vary greatly, issuers have specific transfer restrictions and balance transfer offers change quickly.
Survey findings
Our survey of a market-representative group of 100 popular credit cards found:
Balance transfers are the norm: 88 of the 100 surveyed cards allow balance transfers and 44 of those cards encourage transfers with temporary rate cuts. Last year 85 out of 100 cards allowed transfers and 44 included lower introductory (teaser) rates.
Zero-percent deals abound: As in our balance transfer survey conducted in 2014, 40 cards offer 0-percent teaser rates. Another four cards offer lower-than-normal balance transfer rates (between 2.99-10.99 percent) for a set introductory period. Most of the remaining cards offer balance transfers without lowering rates -- and three actually raise their rates for those transferring balances.
Expect a fee: The most common fee -- 3 percent of the transferred amount -- is charged by 50 out of 88 balance transfer-capable cards. Another seven cards charge 3 percent of each transfer with no minimum. Caps on fees, once the norm in the industry, are all but gone. In our survey, only cards from USAA capped their fees, at $200.
Use it or lose it: New cardholders who want to make transfers will have to do so quickly. Of the 44 deal-offering cards, 28 give cardholders 90 days or fewer to win a rate cut by transferring a balance -- just like last year. However, the average length of time consumers have to make promotion-eligible transfers has edged down to 4.5 months from five months last year. Some card issuers, including Chase and Wells Fargo, allow you to transfer a balance after the intro period, but then boost their fee on some cards from 3 percent to 5 percent.
Fee-free, but no discount: No-fee and 0 percent-deals don't go hand-in-hand. Twelve cards in this year's survey do not charge balance transfer fees, but only two of the 12 also offer reduced rates deals: Capital One QuicksilverOne Rewards and Slate from Chase.
Post-intro rates: The range of post-introductory balance transfer APRs remains great, from as low as 7.99 percent to as high as 26.99 percent. Balance transfer rates are almost always based on an individual's creditworthiness.
For those who take advantage of a 0-percent balance transfer card offer, the savings can be substantial.
Take, for example, a consumer who has an existing $7,500 balance. Let's say that a consumer transfers the balance to a new card with the most common offer found in our survey: a card with a 12-month, 0-percent introductory rate and a 3 percent fee. If the consumer pays it off in a year, payments will total $7,725, including the fee. Compare that to the consumer who starts with the same debt, but pays if off using a card with a typical 15 percent APR card for 12 months. That consumer would pay $8,123.25 -- $398.25 more than if he had used a zero-percent introductory rate card.
To see how a 0-percent balance transfer might work for you, see our 0 percent balance transfer payoff calculator.
Offers may change more once rates rise
The Federal Reserve is expected to begin raising its federal funds rate -- the basis for most credit card interest rates -- as early as December. Once that happens, balance-carrying cardholders will see higher post-introductory interest rates and maybe even different promotional offers.
"I think we will see different credit card issuers react differently," said Alex Johnson, senior analyst for Mercator Advisory Group's Credit Advisory Service. As interest rates increase, "there may be more pressure to adjust offer terms," he added. Some issuers "might change terms to offset changing deposit rates, but at the same time I think there will be other issuers who might even make their terms more attractive so they can stand out among the competition."
Overall, Johnson thinks post-rate increase balance transfer offer changes may include shorter offer terms or increased fees.
Moshe Orenbuch, an analyst with financial research group Credit Suisse, agrees but doesn't think offers will change immediately after the Fed starts raising rates -- especially because rate increases are expected to be small at first, starting with a hike of 0.25 percent (25 basis points).
"I don't think a few basis points will materialize in major offer changes," he said. "At some point that will start shortening the teaser rate period, but not right away. I don't think the first or second rate increase will affect offers."
Issuers fine-tuning offers
Even before the Fed acts, card issuers regularly tweak balance transfer offers. Of the 96 cards surveyed both this year and last, 30 have revised balance transfer terms and offers compared to what was recorded in late 2014.
Some revisions resulted in better balance transfer deals for consumers, such as the Wells Fargo Cash Back college card, which now has a 0-percent teaser rate good for 12 months instead of six. Since 2014, Navy Federal Credit Union has added balance transfer options to its cashRewards Visa and Platinum cards, both of which boast introductory 0-percent interest offers and no transfer fees.
Other changes led to worse deals for consumers. For example, the PNC Points Visa Business card introductory offer is now only nine months long compared to 13 months last year, and both the Blue Sky from American Express and Discover It Chrome for Students cards no longer offer limited time, no-interest balance transfer deals to new cardholders.
Note post-intro rates before applying
With the threat of rising interest rates on the horizon, using a 0-percent balance transfer offer can be a great way to slash interest costs while paying down a debt.
"It allows you to put more money toward the principal and pay it down faster," said Kevin Gallegos, vice president of Phoenix operations for the Freedom Financial Network. "If someone is on top of it and acknowledges the window of time they have to pay off the balance, it can be a very useful tool. Just be mindful of the terms."
Three cards actually make it more expensive to make a balance transfer than a purchase:
Cabela's Club Visa: Purchase APR 15.18-21.18 percent; transfer APR 25.18 percent.
Meijer Platinum MasterCard: Purchase APR 19.99-23.99 percent; transfer APR 26.99 percent.
HSBC MasterCard BusinessCard: Purchase APR 13.24 percent; transfer APR 21.24 percent.
The HSBC card offers new cardholders a promotional 0-percent balance transfer rate lasting six months. The other two have no promotional rate.
Restrictions against 'churning'
Many cards note specific transfer restrictions.
Internal transfers often banned: Of the 28 card-issuing companies, 16 won't let you transfer a balance to another card within their network.
No grace period: If you're not lucky enough to have a 0-percent offer, and transfer a balance to a card that charges interest, that interest will kick in immediately. No card in our survey has a grace period.
No rewards: No card in our survey lets you earn rewards for a balance transfer.
The restrictions are "standard credit card practices to protect against 'churning' -- using credit cards to move money in order to gain access to cash," explained Navy Federal Credit Union spokeswoman Emily Bigham. "Without these safeguards cardholders could earn rewards and pay off the balance using the same funds they received from the transfer."
There also might be a delay between the time you open the account and when the transfer takes place. Eight issuers -- American Express, Capital One, Chase, Citibank, USAA, TD Bank, Fifth Third Bank and State Farm Bank -- say to expect a wait of 10-14 days. The State Farm Visa student card says it can take up to 30 days.
Survey methodology
The 2015 Credit Card Balance Transfer Survey of 100 U.S. credit cards was conducted Oct. 20-30, 2015, by CreditCards.com. The 100-card survey pool is the same group of cards used to calculate CreditCards.com's Weekly Rate Report, and is a representative sampling of cards from all major U.S. card issuers. Information was gathered from the cards' terms and conditions documents, any publicly available cardholder agreements and phone calls to issuers.
See related: How a balance transfer can boost FICO score, How banks limit the size of your balance transfer
