So the long-awaited CARD Act has been in place for a little over a month now, and credit card companies have, by and large, settled into their new reality. They're not raising rates on existing balances, and they're giving warnings about future rate hikes.
But there are some changes you still might not be aware of, and there are still ways credit card companies can pull a fast one on consumers who don't read the fine print. As this article points out, card companies don't want to let any profits go, so they're finding new ways to make their money that comply with the CARD Act provisions.
One major way they can do this is by enticing customers with balance-transfer offers that start off as a low or even zero-percent interest rate, then zoom up once the promotion period expires (that's perfectly legal, by the way, as long as the teaser period lasts for six months or more).
"Credit card companies are persuading customers to move out of an existing card by doing a balance transfer and giving up the rate on a previous card," says Lauren Bowne, a staff attorney at nonprofit group Consumers Union. While your existing rate might not seem all that great and moving to a new card makes sense, take a look at the fine print that spells out what you'll be paying after that enticing promotional rate goes away, she told WalletPop in an interview. Then, don't forget to add in the hefty fee -- up to 5% of your balance - for making the transfer, and decide if it's really worth it.
"Be realistic about balance transfer fees," she warns, pointing out that there's no law that puts a cap on how much credit card companies can charge for this quote-unquote service. Bowne says people can get sucked in by thinking they can pay off their balance before the new, standard rate goes into effect. Ask yourself, "Is it worth transferring my balance? Am I really going to pay it off in the promotional amount of time?" she says.
While many solicitations for balance transfers might come from banks other than the one that's issued your current card, you might even get a notice from the existing issuer of your card trying to convince you to transfer a balance to a different card, also issued by them. In other words, you'd be paying that balance-transfer fee to give the exact same institution your money every month.
"This could be your own bank trying to get you to give up the interest rate you have by hiding a rate increase behind a balance transfer," Bowne warns. So keep reading that fine print - especially on balance-transfer offers.
Credit card balance transfer offers require some homework