Have You Noticed Credit Card Offers Are Changing?
When interest rates are low, 0% introductory rate credit card offers come out to play. Borrowing money is cheap for banks, which they pass along to consumers to entice them to use lines of credit. The goal of the credit card companies is to get consumers to charge up a large balance that is not paid in full by the end of the introductory period. The interest rate is then jacked up and the credit card companies start making money hand over fist.
Some common offers I’ve seen in the past are:
- Zero Interest On Balance Transfers: The length of the introductory rate can vary (6-12 months being the most common), but the back end of the offer is always the same. There is a balance transfer fee, commonly 3% of the amount transferred. A 0% interest rate is in effect for some period of time, but afterwards a much higher interest rate takes effect. Interest is actually calculated and accumulated during the introductory period, but adding it to the consumer’s balance is deferred until the end of the introductory period.
- Zero Interest On Purchases : Exactly like the 0% interest on balance transfers except on purchases, and the balance transfer fee does not apply.
- Low Interest Forever: I’ve only seen this offered once, and it was several years ago. I received offers for a very low interest rate (under 3%) for the life of the balance. This was likely before the financial collapse, and credit card companies were competing heavily for consumer business.
But with the Federal Reserve raising interest rates a tick, borrowing money is now just a little bit more expensive for banks. As the rate increases, those zero percent introductory offers will become less common. While a quarter of a percent isn’t much, it is likely the beginning of an upward trend for interest rates and consumers can already see the effect it has on credit card offers.
- Low Interest introductory period: While I still get a fair share of 0% introductory rate offers in the mail, I’m now starting to see offers with an introductory rate of slightly higher than 0%. For example, I recently received an offer for 0.99% interest for 21 months.
- No Balance Transfer Fee: I also just received an offer for 0% introductory rate for 16 months with no balance transfer fee. I’ve never seen this offered before.
It will be interesting to see what happens to interest rates in the coming months and years, and what effect those changes have on credit card offers.
How about you, Clever Friends, have you received any out of the ordinary credit card offers recently?
Brought to you courtesy of Brock
Brock is a software engineer by day and personal finance blogger at night. He is a fitness junkie and enjoys grilling and smoking meat. Married with two children, Brock strives to improve his skills as a husband and father, and is always on the lookout to stretch his family’s budget as far as he can.
Honestly, we pay our cards off every month so we really only look at the rewards aspects. We primarily look at cash back rewards, and I haven’t seen too much variation over the past several years to justify any considerable changes.
That’s an interesting observation. I like those 0% Intro APR cards because I have the option of using the balance for investment(and I know to pay it off before the promotional period ends). The <3% intertest rate for life also sounds like a great deal. BTW, which card offers the 16-month 0% Intro APR with no balance transfer fee?
Great observation! These marketing efforts continue to change. My favorite is the when a credit card company offers you two options: Either 0% for 12 months with a 3% transfer fee OR 2.99% for 18 months with the same transfer fee. It reminds me of the car offers for $2,000 cash back OR 0% financing. Thy are trying to find which is your emotional trigger… long-term low rates or shorter-term 0%!
I love the idea of balance transfers, with or without the fee. However, when opening a new card, I find that sometimes, they won’t give you a high enough credit limit to transfer jack squat! Sometimes, I think the best bet is trying to snag a balance transfer offer with a card you already have that has a limit high enough to have some impact.
All good points. They’re definitely changing!
I’ve gotten a few with massive bonuses. When I first read the title of this post, my knee jerk answer was “point devaluation and mergers?”
@Moneybeagle – That’s great that you pay your balances off each month…sometimes, however, a good 0% offer can be useful if you were going to do some home improvement or for those thinking of doing some debt consolidation. Thanks for your comment!
@Charlie – I believe the offer for the no balance transfer fee and 0% for 16 months was for the Chase Slate card.
@theMoneyProfessor – Good example……it would be interesting to know how many people actually sit down and figure out which option would actually be best for them financially….
@LIZ – Good info…..but once they have your foot in the door….right? Thanks for reading!
@FF – Ah, the bonuses….sometimes it’s airline miles, sometimes it’s a credit statement if you use the card for X amount in purchases in the first few onths. I forgot about those!
I’ve seen no balance transfer fee and 0% on quite a few cards. I can see how that would be really appealing to anyone on a debt destroying warpath – and a good idea for the credit card companies, since very few people actually successfully commit to getting out of debt.
Exactly, Mel……many people commit just long enough to make the balance transfer. Then they go through the introductory period thinking they have all the time in the world to pay off the balance. Before they know it, the period is over, and the interest rate is jacked up. Playing the balance transfer game successfully requires discipline! Thanks for your comment!
What I seem to be getting more of are offers for earning money back off purchases. Frankly, having to spend enough money to make that worthwhile seems idiotic, yet I believe there are a lot of people who are fooled by the premise, especially with Samuel L. Jackson helping to pitch one of them.
As for the other… I think if people are pragmatic and budget that sometimes moving money for a short period of time still makes sense to do… if those offers continue.
The cash back rewards game is huge…..it can make a consumer buy more than they originally intended!