If You're Considering a Balance Transfer Card, Time May Be Running Out

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Offers that help you pay off debt at a 0% intro APR are waning.

The novel coronavirus pandemic has brought on a massive shift in the economy, and financial institutions have responded. Interest rates are down, businesses and government programs are offering COVID-19 financial help, and even credit card relief is on the table. 

Many of these changes are a lifeline for Americans who have lost income. However, one change might not be so welcome, particularly for those paying off debt: Credit card companies appear to be cutting balance transfer offers.

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Lengthy balance transfer offers are becoming harder to find

In the initial months of the pandemic, several major banks began to cut back on balance transfer cards. JPMorgan Chase, for example, removed the 0% intro APR on balance transfers from a couple of its most popular credit cards, and American Express stopped offering balance transfers altogether.

Other credit card issuers have shortened the introductory period on their balance transfer credit cards. For example, the 0% intro APR offer on two of Citi's most popular balance transfer cards went from 21 to just 18 months. 

Why banks are being more conservative with 0% intro APR offers

Times have been tough for everyone this year, but pulling back on balance transfer offers doesn't necessarily mean banks are hurting financially. Most likely, it's because they're worried that it could be risky to extend these kinds of offers to consumers in our current financial climate.

During the 2008 financial crisis, banks drastically reduced credit limits and put a halt to 0% intro APR offers in order to control risk. Times of financial crisis and high unemployment rates go hand in hand with credit card and loan delinquency. And the fear is that consumers will run up balances they can't pay off.

If someone is financially desperate, they can use a 0% balance transfer offer to free up credit on an existing card and then run up a balance again. Meanwhile, the balance transfer card won't accumulate interest -- at least for now.

Unfortunately, this is an extremely risky move. What this person is counting on is that their income will increase in time to pay off the balance before the end of the card's introductory period. They're also racking up additional debt and spreading it across multiple accounts. In these situations, it's easy to fall behind on credit card payments, especially once the introductory period ends and the interest rate shoots back up to the regular APR. Not only can this result in late payment fees, but it can also damage your credit score.

You can still take advantage of balance transfers to pay off debt, as long as you're careful

Banks might be pulling back on balance transfer offers, but they've far from disappeared. There are still credit cards offering a 0% intro APR on balance transfers for up to 18 months, which gives you a year and a half to pay off the balance. 

Balance transfers can be a very effective way to pay off debt quickly and save money on interest. Here's how it works: Let's say you're paying off $5,000 in credit card debt at an 18% APR and making monthly payments of $300. It'll take you 20 months to pay off your balance, and you'll end up spending nearly $800 on interest. If you take advantage of one of the best balance transfer credit cards, you'll have that balance paid off two months earlier and save around $650, accounting for a 3% balance transfer fee.

It's important to consider these offers carefully. You want to be sure you can pay the balance off in full before the card's introductory period ends. Make sure to calculate how much you can afford to pay off each month before transferring a balance, and take into consideration the fact that you could lose income during that time.

If you use it wisely, a balance transfer credit card can fast track you to paying off your debts. Take advantage of lengthy balance transfer offers now while they're still available.

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