Credit Card Debt

Customers who pay their balances in full every month may be treated by credit card companies as if they’re royalty, but they’re not actually all that profitable. Some pay monthly fees, but they rarely, if ever, contribute to the card issuers’ principal consumer revenue streams, which are interest, late fees, and overlimit fees.

Credit card debt is the lifeblood of the industry, which is why balance transfer deals are still being offered. At the same time, credit card companies are, according to IRA Bank Monitor, having to write off some 10.35 percent of all such debts as uncollectable. So card issuers are particularly looking for customers who have good or excellent credit scores, but who also carry balances forward.

Balance Transfer Credit Cards–the Good Old Days

It feels like a different era, but it was only a couple of years ago that credit card companies were falling over themselves to attract new customers. Indeed, it was at the end of 2008–just 14 months ago–that U.S. credit card debt reached its highest point and topped $445 billion.

But its been a while since it was widely possible to transfer your credit card balance without incurring a fee. That’s because credit card companies realized some time back that many smart customers were transferring their balances immediately every time their zero-rate introductory offers expired. So those consumers were effectively borrowing money without ever paying any interest, something that those in financial services find anathema.

Balance Transfer Credit Card Deals Today

WBKO just published a list of current (well, they were current last week when the feature was published; check with the card issuers to see if they’re still the same) fees initially charged by some of the major banks for balance transfer credit cards. These are expressed as a percentage of the sum to be transferred:

• American Express–three percent
• Bank of America–four percent
• Capital One–nil for most, but three percent for a Platinum Prestige card
• Chase–five percent
• Citi–three percent
• Discover–five percent

Before Making that Credit Card Application…

Dennis Santiago, CEO of Institutional Risk Analytics (IRA), wrote a piece about transferring balances between credit cards for the Huffington Post last week. In it, he said:

Favorable introductory rates and good payer rates are the “toasters” of the credit card world. They’re meant to capture and retain valuable “interest on outstanding balance” paying customers. This means if you have one of these credit card accounts and diligently pay the minimums on time every month–yup, yup–you are valuable to that bank. Perk up! You are valuable whether you have a checking account there or not. What you also need to realize is that every other credit card issuers out there also covets you. That’s why those things keep clogging the mail box and wink at you from the computer screen every time you log on or off your online banking. Just make sure to keep paying that minimum and your account will keep getting the favorable treatment.

But no matter how desirable you are to card issuers, you should carefully check out the different deals on offer before you make any credit card application. And you can begin to assess those deals by using the credit card calculators here.

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