In the summer of 2020, balance transfer credit cards went the way of toilet paper at that time: suddenly unavailable. But like non-elastic-waist pants, balance transfer cards are slowly making their way back onto the scene. If you have high-interest credit card debt and hoped to move that debt to save on interest, you’ve got a few more options than before.
Still, there are limits:
- You need good or excellent credit to qualify. Back in July 2020, some balance transfer cards were available only to those with excellent credit (FICO scores of at least 720). Now, you may be able to qualify with only good credit, meaning a FICO score of 690 might suffice. But anything lower drops you down to fair or even bad credit, in which case a balance transfer card will still be out of reach.
- Some pre-pandemic card options still have not returned. For example, as of this writing, you won't find balance transfer credit cards on the websites of American Express, Capital One or Chase.
Why are balance transfer credit cards coming back?
Credit card offers are subject to “market conditions,” which is a nice way to say “whether or not the economy is a cause for concern.” And by the start of the second quarter of 2020, things were looking grim.
Unemployment peaked at 14.8% in April 2020, compared to a January 2020 low of 3.5%, according to data from the Bureau of Labor Statistics. An April 2020 Federal Reserve survey found that banks tightened their lending standards for credit cards and other loans over the first quarter of the year. To lower their risk, banks pulled back on balance transfer cards that let consumers borrow considerable sums at 0% interest.
Now, things are looking up. Unemployment in April 2021 was at 6.1%, according to the BLS. An April 2021 Federal Reserve survey found that banks were easing standards for credit card applications — the exact opposite of what occurred just one year before. And according to Competiscan, a company that tracks and analyzes direct marketing activity, 51% of mailed credit card offers in the first quarter of 2021 included a balance transfer offer, an increase compared to the previous two quarters.
In other words, as far as credit cards are concerned, nature is healing.
Where can you find balance transfer credit cards?
Last year, some issuers pulled balance transfer cards off the market almost entirely. Many have returned.
You'll find balance transfer offers from major issuers like Bank of America, Discover and Wells Fargo.
It's also true that some issuers never really pulled back at all. Citi, for one, still offers multiple products with balance transfer terms and did so even amid the depths of the pandemic in 2020.
Other ways to pay down a balance
- Buy now, pay later: Companies like Affirm and Klarna partner with specific retailers to offer installment payment plans upon checkout. Moreover, some major credit card issuers are getting into this market as well, providing cheaper and more convenient ways to tap into your credit line and cover large purchases over time.
- Personal loans: If you don’t qualify for a balance transfer credit card, a personal loan might be an option for consolidating your credit card debt into one lower-interest monthly payment over a set period of time.
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The article Why Balance Transfer Credit Cards Are Starting to Blossom Again originally appeared on NerdWallet.
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