Balance Transfer Day: Be Careful With This Credit Card Strategy

The latest anti-big bank crusade is called Balance Transfer Day and urges consumers to ditch high-interest credit cards and move into promotional zero-percent cards from smaller institutions.
The Facebook page for the new campaign sets Dec. 11 for consumers to use the popular credit card marketing promotion of balance transfers to switch away from their higher interest cards.
“Together, we can create our own bailouts by using a balance transfer as a means to bail ourselves out of credit card debt,” reads the Facebook page of Balance Transfer Day.  “This can be achieved by transferring card balances from interest bearing accounts with large banks to 0% interest cards issued by credit unions and community banks.”
But the strategy can have several pitfalls for consumers. A credit score can be adversely affected by adding more credit if you are already heavy in debt.
And then there are the balance transfer fees – normally 3 percent to 5 percent – and promotional terms to consider, especially how long the zero-percent APR will last and what will be the standard interest rate once the promotion expires. Average APRs are running close to 15 percent for all U.S. credit cards.
Another stumbling block: the best offers for balance transfers tend to come from the bigger banks.
For example, Citibank offers what is likely the longest zero-percent term. The Citi Platinum Select Card offers a zero percent APR on purchases and balance transfers for 21 months.
Chase and other big banks commonly offer balance transfers of zero-percent APR for six months to a year. Other offers include very low promotional rates, such as a 1.99 APR, for a longer period of time, as long as 18 months.
Smaller community banks or credit unions are likely to offer lower promotional rates, instead of long periods of no interest. Fortunately, there are plenty of good deals out there from credit unions that require some research.
For example, the PenFed Visa Promise card is available to members of the Pentagon Federal Credit Union with a 7.49 percent APR on purchases for the first 36 months, then a variable rate, currently at or just above 10 percent. It has a 4.99 percent APR on balance transfers for 24 months with no transfer fee.
The National Association of Federal Credit Unions provides many resources on its website, while the Credit Union National Association provides a search function for finding an institution near you.
Consumer advocates say that cardholders who tend to carry a balance month-to-month should look at new cards that offer sign-up bonuses and reasonable standard APRs.
If you’re among the 56 percent of U.S. consumer who pay off their card balances each month, Consumer Reports said you might want to consider offers with introductory bonuses of cash, miles or points.
The best rewards deals are reserved for those with credit scores of 730 to 740 and up, Consumer Reports said.

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