Will 0% No Balance Transfer Fee Credit Cards Return?
As you might have already guessed, American banks are not jumping for joy about the new the Credit Card Accountability Responsibility and Disclosure Act of 2009, also known as the Credit Card Act. The new law, together with new rules imposed on banks by the Federal Reserve in August of 2010, place limits on fees and other charges and, in general, make having a credit card in your wallet a much better financial arrangement for you.If you think that banks have responded to the new credit card rules by coming up with creative ways to generate revenue, then you're right on the money.
For example, banks are no longer permitted to charge inactivity fees. However, some banks have figured out a clever way around this rule: charge an annual fee that's waived if the cardholder spends a certain amount on his or her card each year.
So what about 0% credit cards that don't charge a balance transfer fee? These offers were extremely popular during the pre-financial-meltdown credit boom, but they disappeared as the shockwaves from the 2008 banking crisis rippled through the American economy. "No fee balance transfer" cards still exist, but current offers from reputable banks don't feature the added benefit of a zero percent introductory annual percentage rate (APR) on transferred balances.
When will zero percent intro APR no fee balance transfer cards return to the American market? Nobody can say for sure, but it's a pretty safe bet that they will return eventually. Banks need time to figure out how to make credit cards as profitable as possible without breaking any of the new credit card rules. That might take many months, or even years. Moreover, don't expect these specific offers to return until the American economy is expanding at a decent pace, and sustainably.
Credit cards are still extremely useful financial tools that offer great benefits like purchase protection and cashback rewards. What's true now has always been true about credit cards: pay attention to the terms and conditions before signing on the dotted line, and do your best to avoid finance charges. Competition in the credit card market is still very healthy, so if you don't like the deal your current bank is offering, you can always pass and signup for a card elsewhere.
Labels: balance_transfer, credit_card_balance_transfer, no_fee_balance_transfer
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posted by Steve Brown | 9/15/2010 05:14:00 PM
3 Comments:
You are certainly right that it will take the pencil pushers a bit to figure out how to conform to the new laws and maintain their share of profit.
Whether it will return or not will depend mainly on the consumer call for it. If they feel that it will jeopardize the bottom line, then it will make a return. In other words, will people stop using the card, versus what it will cost them to do the 0% no balance transfer? I think it's a fairly popular feature that people would hate to lose, so that's in it's favor.
I'm sure there is a whole section of the people at Visa and Mastercard, etc, who are downing oodles of Pepto Bismal trying to figure this all out. And in time, we'll get the answer.
I used to know a lot of people who kited their debt around this way. But how can you fault them if the credit tools are available? is it worse than having default after default hit a credit union's bottom line and see aging properties stack up at the bank? Banks are in the business of profit, not ownership. They can't make money if nobody is home buying. Nobody can buy homes right now because all their debt is saddled in their credit and in their equity. So why not open up a modest fee transfer for every $1,000 moved over, allowing spending room on the old card and debt payment flexibility on the new card. Then people can start spending again.
More positive economic news this morning: The Commerce Department reported that housing starts increased by 10.5% last month. Wall Street economists were expecting an increase of around 0.2%. Let's hope the good economic news continues into 2011. Back-to-back positive news about the housing market could trigger businesses to feel confident in the economy, and start using the piles of cash they're sitting to do some serious hiring.
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