The credit market must be picking up again

There are some signs now that the credit (or at least credit card) market is starting to wake up from a long slumber.  Credit card balance transfer offers (circa earlier last decade) are stopping to pop up again in my inbox and mail box just like the good old days.  But as always, must be read carefully.


The fundamental changes I have seen with these balance transfer offers, from both my bank, and credit card companies, are two-fold: 1) the fees are higher, meaning no more "free" transfers like I have seen in the past; 2) quick turn around requirements.  From what seems like ages ago, I used to get offers all of the time to consolidate balances at 0% interest for 10 months or so.  Occasionally, they would be "no fee" transfers, meaning all one had to was send the check in and pay off another balance.  If used properly, one can essentially beat the system for a while.  Of course, if one forgot to pay the minimum balance one month, or went past the "teaser" period to pay it off, one would be subject to huge interest rate increases. 

Now, not only do the offers have a minimum transfer cost, say 4% of the balance requested, there are no maximums on the fees assessed, unlike before.  In the past, it seemed that balance transfer fees were capped at $75, now, the sky is the limit.  That of course depends on your credit card limit in terms of how much you can borrow, too.  Thus, if you look at the interest rate being offered, if you are lucky, 0, but more like 3.99%, if paid off within the terms of the loan, and not added to, the rate is about 8%.  If not paid off, 8% is the floor and the ceiling is in the double digits.


There seems to be a pressure component now, too, with offer turn around requirements of a month or less.  It seems that credit card companies want to make consumers act (hopefully responsibly) as soon as possible.  I don't like that kind of pressure, and it's what has gotten a lot of people in trouble in the past.


In a pinch, and used responsibly, these offers are a great way to consolidate balances.  If you think about it, if you are paying 15% or more on a credit card balance, and if you know you cannot pay it in full for a while, it might make sense to pay the balance transfer fee and get the lower rate.  But, try to project out when you are going to be able to pay off the balance.  And, try not to run up the balance on the higher rate credit card while paying off the lower one.


While it's better not to get into debt, if avoidable, there are tools available to consumers again that can be used to help manage their debt better. 

Not all credit card offers are alike

Efforts to lure customers in signing up for credit cards might be getting a little desperate. Here's one incentive from a Washington, DC-area car dealer to avoid. 

It was comical, and photo-worthy, to capture this credit card offer.  Being a car dealer, one would think that perhaps a free gas card would be an incentive, but amazingly, not. Sadly, what lures many into crushing credit card debt is worthless trinkets like these. It’s a very similar ploy to what has been happening to college students for years. Sign up for a card and get a free t-shirt. However, recently, the Obama administration began cracking down on some credit card companies' unscrupulous practices. Without getting into too much legislative detail, his new law purports to halt fees and other practices deemed unfair by some that have caught many Americans in a credit card debt trap.

Credit Card Benefits

If used wisely, credit cards are an awesome tool for consumers. First, by using them, consumers don’t have to carry around large amounts of cash to make purchases. Second, credit cards are safer than cash in that if they are stolen, consumer liability is in many cases zero. If one loses their wallet, that’s pretty much the end of that. Thirdly, credit cards offer rewards, such as cash back, frequent flyer miles, and points, akin to a discount, that take some of the bite away from spending.

Credit Card Debt

Unfortunately, the misuse of credit cards, meaning rampant spending without paying off the monthly bill, has gotten many into trouble. Unable to pay bills, some will be forced to file for bankruptcy, which hurts all consumers. If possible, paying cash will help stop shopping cravings. Just as it may feel uncomfortable to carry hundreds of dollars around in one’s wallet, it should feel the same to keep spending frivolously when one is paying crushing credit card interest. If one is in debt, consider asking the lender to lower the interest rate. Banks would rather have something than nothing, after all.

Comparing Credit Card Offers

To help consumers navigate the sometimes complicated world of credit card deals, incentives, fees, and benefits, there are many websites that track on-going offers. Credit Card.com is one such site. The site has a very clean interface that allows one to quickly select a card by a particular feature, provider, and credit eligibility. Don't get carried away, however. It's not necessary to carry several credit cards and two is all what most people need.

How To Take Advantage of Credit Card Savings Programs & Rewards

While there are several other websites and blogs that track various credit card deals, I am reminded myself, especially the other day in the mail, that credit cards can often come with discounts that people either don't know about or forget. Case in point, a signature Visa card saved my hundreds of dollars this past summer for two trips I took which involved staying at Hilton properties. Clear as day, Hilton's website mentioned special savings of up to 25% if one used a signature Visa. In this case, Hilton had a handy tool for checking if your card was eligible.

Consider also Discover and Mastercard savings. While performing your due diligence in shopping for items online (a future post which will go into detail) check the discovercard.com or mastercard.com websites to see what special promos they may have. The savings may surprise you. It could be x % off of a rental car, or discounted movie tickets, just for using your card that would have otherwise. However, don't use your card if you are going to carry a balance. It's not worth the interest. Regarding the offer in the mail, Bank of America has something called "Add it up," a program whereby consumers can receive up to 20% cash back and discounts from 270 retailers, the literature reads. A link to the program is here:

Other cards may have similar offers, too. Check your card's website, or call their customer service directly and ask.

How To Negotiate Credit Card Debt

Unfortunately, most Americans are highly in debt. The recent credit crisis has only showcased this problem. While not all debt is bad, such as student loans and mortgages, credit card debt will choke the life from your finances.

If you are in debt, make sure that have the lowest credit card rate possible. To do this, depending on how good your credit is, do a little research and see if you can get your rates lowered either with your card, or with another.

To find out if you are getting the best deal for yourself, visit websites like Bankrate.