Balance transfer fees used to be a minor annoyance: typically less than 3% and generally capped at $50 to $75. Now they’re as high as 5% of the transferred balance, with no caps, and issuers may well continue to boost them in their never-ending quest for profits to replace what they lost to credit card reform.
Bill Hardekopf of LowCards.com recently did a round-up of current balance transfer fees by issuer, and here’s what he found:
Chase: 5%
Discover: 5%
Bank of America: 4%
Citi: 3%
American Express: 3%
Capital One: most do not have balance transfer fee, but the Platinum
Prestige card charges 3%
As before, you have to do the math to make sure a balance transfer makes sense, since the fees will offset and could outweigh any interest rate savings. Hardekopf advises that if you need longer than a year to pay off your debt, you should consider a card with a low on-going rate rather than one with an ultra-low teaser rate that will expire.
Hardekopf’s additional advice:
You must pay on time, every time. If you have a late payment, your
introductory period will likely end and you will be assessed the APR
on the transferred balance.
There is no grace period with balance transfers. Interest charges begin at
the time the check is issued to your credit card institution.
You can’t transfer your balance to another card with the same issuer.
It takes about four weeks for the balance to be transferred. Continue to
make all required payments until you confirm that the balance transfers were
made. Multiple balance transfers will process in the order they are
requested on the application.
The new issuer pays the amount of the balance directly to the old issuer
and the amount you owe them will be reduced by the amount you transferred.
The available credit on your new account will be reduced, as if you had made
a purchase.
Transferring a balance does not automatically close your old account. If
you want to close the account, contact the issuer directly.
Issuers have the right to decline balance transfer requests or transfer
less than you requested.
College students are carrying record-high balances on credit cards and charging items even though they know they don’t have the money to pay for them, says a new study by student lending giant Sallie Mae.
Students last year carried an average balance of $3,173, up 46% from 2004. And graduating seniors carried an average balance of more than $4,100, up from $2,900 in 2004. Almost half of graduating seniors carried a balance greater than $7,000.
Other findings:
How many cards: 84% have at least one credit card. That’s up from 76% in 2004. The average number of cards is 4.6. Half have four or more cards.
Making payments: Only 17% pay off their balance each month, and 22% make the minimum payment. Only 14% pay some cards in full and make only the minimum payments on others. And 7% pay less than the minimum payment.
Charging tuition: One-third put tuition on their credit card, up from 24% in 2004.
What else do they charge? Besides education supplies and books, 84% use credit cards to pay for food; 70% for clothing; 69% for cosmetics.
No clue about balances: 60% were surprised how high their balances had reached, and 40% charged items they knew they couldn’t afford.
Getting that first card: 58% got their first card from a direct mail solicitation. Only 17% said parental referral.
“These statistics are concerning, because these students will walk into the ‘real world’ with a lot of debt from their credit cards and student loans,” says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook. “It is going to take some time and work to pay it all off. They are also learning bad practices with credit cards and not receiving the financial guidance they need.”
I think the answer goes beyond mere education. We need to restrict the kinds of cards people under 21 can get, as I explained in my recent MSN column, “Teens need a financial driver’s license.”
Hardekopf, however, said card issuers will battle any attempts by Congress to restrict the marketing and availability of credit cards to college students.
“College students are an important target market because card loyalty starts at a young age,” he said. Issuers “also consider these loans to be a pretty good risk because parents usually bail out their children.”
To conduct the study, researchers analyzed aggregate credit bureau reports for a randomly selected group of 1,200 student loan applicants. In addition, surveys were sent to 5,800 undergraduates, of which roughly 5 percent responded. The full study is available online:Â www.SallieMae.com/creditcardstudy
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