Credit Card Balance Transfer Offers

Balance Transfers Get More Protection Under Card Act

A new Federal Reserve rule will protect credit card holders taking part in promotional programs that waive interest charges for a certain period of time.

As far as I can tell, this will apply to credit card balance transfers, such was 0% balance transfer credit cards and others that allow card holders to avoid paying finance charges for a specified time period.

The Fed announced this week on its website that such programs will be afforded the same Credit Card Act protections as promotional programs that apply a reduced rate for a specified period of time.

For example, a credit card issuer that offers to waive interest charges for 12 months will be prohibited from revoking the waiver and charging interest during the 12-month period, unless the account becomes more than 60 days delinquent.

This is great news for those who elect to take up balance transfer offers from credit card issuers, as there will be less worry of winding up with the default rate (balance transfer pitfalls).

Typically, balance transfers have conditions in place that say the promotional rate, such as 0% APR, will be rescinded if the card holder doesn’t make on-time payments.

So if you were to miss just one payment, the card issuer could revoke your 0% APR and slap you with the default rate, which may be 20% or higher.

That would certainly make it very difficult to pay off credit card debt, which is the main purpose of a balance transfer.

This new rule gives card holders a little more leeway so they won’t automatically be punished for missing a single payment.