Why Do Credit Card Issuers Offer Balance Transfers?

March 2, 2011 No Comments »

why

If you already know what a credit card balance transfer is, you may be wondering why credit card issuers choose to offer them.

In short, a balance transfer allows a consumer to move a credit card balance from one credit card to another in the hopes of saving some money.

Credit card companies typically lure customers in with 0% balance transfer credit cards and other promotional deals, such as no fee balance transfer credit cards.

So why do they do it?

To Drum Up Business

One major reason why they shoot balance transfer offers your way is to drum up business. They assume that if you move your credit card balance to them, you’ll stick with them for a while, or even long-term.

Once you’re on-board, there are plenty of ways for credit card issuers to make money, whether it be promoting new products and services or earning interest via finance charges.

They Think They’ll Win

When it comes down to it, credit card issuers think they’ll make money off you. And if you look at the stats, I’m sure the odds are pretty good that they will.

Even if you transfer a balance and pay down most of it during the promotional period, they may start earning interest on any remaining amount once the rate shoots higher.

And they may even charge you a balance transfer fee to get your business in the first place, which sees them in the black right away.

It Can Be Win-Win

But it doesn’t have to be about winning and losing, at least not between you and your new credit card issuer.

If you’re currently paying sky-high APR on your credit card balance, moving it to a new balance transfer credit card can save you a ton of money.

Sure, you may have a pay a little to your new card issuer, but it beats paying hundreds in finance charges to your old card issuer while getting nowhere in paying off your credit card debt.

Leave A Response