Posted by Lending Club :: January 28, 2009 @ 6:12 am

A while back I described The Balance Transfer Game – transferring a credit card balance from one card to another with a low teaser rate. The game had many downsides at the time, and has since gotten even worse.

According to Market Watch, recent changes will cause credit card balance transfer deals to cost you more in at least the following ways:

Transfer Fee Caps Have Been Eliminated

Fees have traditionally been a set percentage up to a capped maximum. With the cap removed, the more you transfer, the more you’ll pay.

Teaser Rates Are Rising

0% on balance transfers was the norm for a long time. Now, many offers are at 2.99% or higher. Paying no interest while the teaser rate was in effect was enticing, but non-zero rates are much less so.

Terms of Teaser Rates Are Shortening

Along with 0% offers, teaser rates traditionally lasted for at least a year. Now some are in effect for as little as 3 months. A shorter term makes playing the game less desirable and requires participants to play much more often if they hope to keep up.

Transfer Maximums Are Decreasing

The total amount that is eligible for the teaser rate is also coming down. This too effectively makes consumers have to play the game more often, since they might need to spread their current balance across multiple new cards to qualify for the teaser rate for the full balance.

The combination of these four changes means that if you choose to play the balance transfer game, you’ll probably be able to transfer less, you’ll see higher rates and pay a larger fee on what you do transfer, and you’ll have less time before the teaser rate gets reset to your much higher normal interest rate.

If the balance transfer game was a risky one to play before, it has gotten even worse as a result of these latest changes. There are still legitimate ways to play the game, but those fitting the criteria for success are dwindling in numbers. For the rest of us, using balance transfers is a practice best avoided, particularly when lower risk alternatives for consolidating credit card debt (such as the fixed-rate, 3-year P2P loans from Lending Club) are readily accessible.

Have you played the balance transfer game lately? Was it worth it for you?