Return of the Balance Transfer Credit Card
By: Brian O'Connell

NEW YORK (sbup) — It took a while, but balance transfer credit cards are making a comeback. And it's happening after the 2009 CARD Act capped card fees, penalties and late charges, all cutting into credit card company profits. But it’s 2011 and credit card companies are starting to edge back into the market, with some intriguing new deals for consumers, and one major card provider leading the way.

Credit card companies have been struggling to find their way after the CARD act limited many fees. According to a new study from the U.S. Consumer Financial Protection Bureau, late fees have just about been cut in half since the act became law, sliding from $901 million to $427 million from January to November 2010. The average late fee fell from $35 to $23 over that period.

Some credit card companies have begun to look elsewhere to make up for the lost profits, mainly at generating new business, and that’s why some issuers are turning to balance transfer credit cards to lure new customers into the fold and hopefully keep them as customers for the long haul.

That’s certainly what Discover (Stock Quote: DFS) is doing. The financial services company is offering a no-balance transfer fee card (something of a rarity these days) with 0% interest on the balance for 12 months. It’s the only balance transfer card on the market not charging a balance transfer fee, though the deal is reportedly on the table for a short time only.

The balance fee is definitely a hook to get you into the Discover card club, but you can save a lot of money on the front end. Take a $3,000 balance transfer scenario: With normal transfer fees of 5%, you would pay $150 in fees to transfer your balance. Discover is waiving that fee, and you still get the 0% rate for the next 12 months on top.

The company is also offering a separate balance transfer credit card with a 0% rate for 24 months, the longest 0% deal on the market these days. But this card does have a balance transfer fee of 5% so tread carefully on those high balance cards you want to jettison.

But it’s not all about Discover, though. Other card issuers are returning to the balance transfer card market too, like Citi (Stock Quote: C) with its Citi Platinum Select Card. The card has a 0% interest rate on the table for 18 months, with a 3% balance transfer fee. If you have a long-term debt problem but figure you can get out of it within 18 months or so, the Citi card seems like a pretty good deal.

Expect more card companies to hop back into the balance transfer card market. It’s a good way for them to attract new customers, and such deals allow consumers to buy some time to pay off old debts. For now the turf is dominated by Discover and Citi, but expect that to change very soon.

—For more ways to save, spend, invest and borrow, visit MainStreet.com.

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