Credit Cards: March 2009

Since the peak of the credit crisis back in the fall of last year, I hadn't seen any favorable balance transfer offers from credit card accounts I already have open. Bank of America (BofA) has been sending me lots of offers, but each of these BofA offers left a bad taste in my mouth. BofA wants me to pay a balance transfers fee and pay finance charges on the transfer fee. No thanks!

I'm happy to report that Citi® is now offering a somewhat decent balance transfer offer with my Dividend Platinum Select® card. Here it is:

Back in early 2007, before the credit crunch, I used to login to this Citi account and I'd be presented with at least 4 unique offers. During the roughest part of the credit crisis, however, the balance transfer section of my online account management interface contained no offers. Today I found one offer: 0% intro APR for 6 months on transferred balances, with a $75 cap on the balance transfer transaction fee. $75 is not very consumer-friendly, but when you consider that many other balance transfer deals have no cap on the transfer fee (like with the Citi® Platinum Select® MasterCard®), it's not so terrible. Will I take advantage of this offer. Nah.

We are not recommend any Citi credit cards at the www.BalanceTransfer.cc website now, for the simple reason that we believe Citigroup is a zombie bank. However, if you really must have a Citi card, visit the www.citicards.com website and you can browse all the personal, business, secured, airline, gas, student and store-branded cards they have available.

We may recommend Citi cards at some point in the future, if Citi reorganizes and becomes a responsible and commercially sound retail bank.

Labels: balance_transfer_fee, citi

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0% Intro APR credit cards that don't charge a fee on introductory balance transfers, and that are being offered from reputable American banks, are the best credit card deals in the American market today. This article offers some timely and useful advice for those who are looking for the best possible 0% credit card deal.

Caveat #1: Make sure to note the interest rate that you'll pay once the interest-free period ends (this is sometimes referred to as the "go to" rate.) If you end up paying a significantly higher interest rate on your balance once the interest-free period ends, then you could end up with a much worse deal than you had before. So pay attention to all the numbers and, if you can, payoff your entire credit card balance once the interest-free period terminates.
Caveat #2: Read the fine print carefully. Many zero percent balance transfer deals offered these days come with a catch: if you make any new purchases on the card to which you are transferring your balance(s) during the interest-free period, the annual percentage rate (APR) on those new purchases can be very high, as much as 29%! What's more, any payments you make toward the new card will very likely be applied to the lower interest, transferred balance(s) first, further exacerbating any lack of discipline on your part. So be careful. Balance transfer deals are a great way to save a lot of money in the long term, but if you have to make any new purchases, you are better off using cash, a debit card or a prepaid credit card.
Caveat #3: Be careful when using convenience checks! With most credit cards, those convenience checks that you often find packaged with your credit card statement can get you into real trouble if you are not careful. With most cards, use of those convenience checks is tantamount to a cash advance, and credit card cash advances always have very high interest rates associated with them. Some credit cards will give you a favorable interest rate if you use their convenience checks to transfer balances from other credit cards. But read all the fine print carefully. Make sure that you understand exactly what you are getting into before using any convenience checks.

OK, now for the good news: certain credit card companies will send you blank checks that you can use with their 0% APR balance transfer offer. These checks are really great because you can use them for anything you like. Many money-savvy consumers use these 0% balance transfer convenience checks as a way of getting an interest-free loan, but you can also use them to open a high-yield savings account or purchase a Certificate of Deposit*. Just remember: once the 0% intro APR period ends, interest charges will start to accrue on that "loan," so it's best to return any money that you intend to use with a zero APR convenience check back to the credit card account once the interest-free period terminates.

Of course, all convenience checks have their limits, usually equal to the credit card account's credit limit.

If you are not 100% sure as to whether or not the checks you'll receive with your new credit card are in fact 0% balance transfer convenience checks, then take 5 minutes and call the credit card company to find out (NB: I think it's always a good idea to write down the name of the representative you speak with just in case he/she makes a mistake.)
Caveat #4: Don't overdo it! It doesn't matter if you are approved or rejected: too many applications for credit within a brief time span can result in a downgraded credit rating. Look for balance transfer deals that offer at least a 6 month intro APR on balances transferred (12 months or more is better) so that you don't end up transferring balances too often.
Caveat #5: Before you submit an application for a credit card balance transfer, make sure that the credit card companies that you are dealing with are in fact different. If you try to transfer a balance from one credit card to another and both credit cards are owned by the same bank, then you application will almost certainly be rejected. If, for example, you try to transfer a balance from a Discover it® for Students card to a Discover it® credit card, your balance transfer application will most likely be rejected because both credit cards are issued by Pulaski Bank. This might not seem like a big deal, but remember: Inquiries into your credit report can have a negative effect on your credit rating, especially those inquiries that result in any kind of rejection.
You can usually consolidate two or more credit cards that have been issued by the same bank into one aggregate credit card, with the resulting aggregate credit card having a credit limit equal to the sum credit limits of the consolidated cards. You should call your credit card company for more information about consolidating credit cards.
Caveat #6: Make sure that the credit card account to which you'll be transferring your balance(s) has a credit limit that won't get you into trouble with fees. For example, if you are planning to transfer a total of $5,000 via a zero percent intro APR offer, the credit limit of the receiving credit card account should have a credit limit that's above $5,000. Some zero APR offers charge a fee for transferring balances, and if you don't have enough breathing room, the credit card company may smack you with an over-the-limit fee once the balance transfer transaction fee is added to your account (of course, you first priority should be to find offers that don't charge a fee for transferring balances.)
Caveat #7: Sometimes, a balance transfer offer is so good that even with a balance transfer fee, it's worth doing a balance transfer to the card, especially if you have high balances to transfer. However, watch out for these two pitfalls:
- A decent balance transfer offer that includes a transaction fee will cap the fee at a reasonable level, usually between $75 and $99. If the deal has no cap, then you may end up regretting the decision to transfer your balance(s) when your statement arrives.
- Read the fine print and find out if the balance transfer fee is subject to finance charges. Believe it or not, with certain deals out there, you could end up paying finances charges on a balance transfer fee. Bottom line: there are still a few consumer-friendly, 0% intro APR balance transfer offers available in the American market, so there's no reason to signup for a deal in which you'd be paying interest on a balance transfer transaction fee.
Caveat #8: This may seem obvious, but make sure you pay all your bills on time -- not just your mortgage and credit card bills: you need to stay on top of your household utility bills as well (cable, phone, natural gas, etc.) Bottom line: the banks and credit card companies will offer the best 0% deals to customers with the best credit scores, plain and simple. Having a high FICO® credit score (shoot for a FICO score of 720 or higher) will also minimize the risk of having your credit application rejected.

For your credit card accounts, use payment scheduling and automatic payments online, and keep those paper statement coming as a backup payment option just in case.