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Gamers Run Out of Transfer Options
Credit card issuers have offered balance transfer options as
lures for getting debtors to utilize their cards. They used
teaser rates and other promotions to encourage you to transfer
balances to their cards. Some people have gotten so good at
transferring balances that they rarely pay much in interest.
Credit card issuers refer to these savvy consumers as "gamers."
These balance transfer fees used to be capped, so that you
could benefit by transferring a large balance from one card to
another by paying a fraction of what the transfer fee would have
been. These caps are now being removed from most credit card
transfer offers. Some caps have gone up substantially. Other
creditors have eliminated this cap on transfer fees. Bank of
America has announced they will remove their cap altogether
effective March 2008.
This means two things for gamers. First, you must be prepared
to incur a 3 or 4 percent charge for transferring a balance.
This may be worth it if the interest savings are substantial
enough. However, it definitely changes the nature of the
transfer game.
Second, balance transfer fees are increasingly being included
in the minimum payment calculation for the following month. What
this means is that when you transfer a balance, you could face a
substantially higher minimum payment on the new account for the
next month. If you cannot pay this higher amount upfront, then
you risk losing that promotional rate. More importantly, you
could be facing default rates of 24 to 32 percent.
When you are contemplating a balance transfer offer, make
sure you understand all of the costs involved as well as the
estimated savings. If you are comfortable that you are getting a
good deal, then next make sure that you can afford a minimum
payment amount of up to 6 percent of the new balance. Your next
monthly payment will likely be up to that amount.
If you are able to utilize balance transfers with these
additional fees and still pay down your debt balances, then you
have found a way to still game the system. Make sure you
understand the
pros and cons of balance transfers. However, if you are
unable to reduce your debt balances, then you might be in more
serious financial trouble. If this sounds familiar, you should
contact an accredited counselor today for additional
information and options. |
