Balance Transfer Costs on the Rise

Those important lifelines called “balance-transfers” that consumers drowning in high-rate credit card debt rely on, are now getting pricier. And for just about anyone who carries a credit-card balance, they’re a useful way to keep interest-rate payments low.

But as the year nears its end in one of the worst economic slumps, credit card issuers are making those lifelines more restrictive and expensive. That means consumers must make sure transferring their debt makes financial sense. Before, a balance-transfer fee was typically 3% of the amount transferred — up to a maximum of about $50 or $75, depending on the offer. These days, the fee is still usually 3%, but the cap is gone. The more you transfer, the more you pay. For instance, transferring a $5,000 balance is likely to cost you $150 today, twice as much as in past years.

Another change: Though some credit-card issuers still offer 0% balance-transfer rates for 12 months or more, others are hiking the introductory interest rate and shortening the length of time it’s offered, whereas they used to almost always be 12 months, now they can be as short as 3 months!

These changes to balance-transfer offers come even as credit-card issuers are hiking rates, raising fees and lowering credit limits on customers’ current accounts. While moving balances to a new card can be a smart move for those who find themselves subject to such changes, the decision to transfer a balance now isn’t the shoo-in it used to be.

Now that balance transfers are more expensive, assess the cost of the offer against how long it would take you to rack up an equal amount in finance charges on your current card. Don’t forget to check the offer terms carefully, including the fine print on how long the introductory rate lasts. But before you commit, make sure to shop around, especially since deals aren’t easy to come by anymore!

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