The Latest Impacts of the Credit Crunch on Balance Transfer Offers
In the latest sign that the credit crunch is spreading, the AP reports that the rate of delinquent and defaulting credit card accounts has skyrocketed recently. Credit card companies have been revising their estimates of 2008 write-offs upward due to defaults; for instance, Capital One last month projected at least $4.9 billion of default-related write-offs.
Every issuer has responded in at least some way to mitigate their risks. This is most evident in my survey of offers to new customers. Here are some illustrative examples:
- Just in the past month, Discover has reduced the intro 0% period for purchases on their consumer cards from 12 months to just 6 months.
- Despite the decline in the prime rate, Capital One has increased the APR on its consumer cards by half a point, also in the past month.
- Chase has also been aggressive in systematically reducing its exposure by making its balance transfer offers much less attractive. While Chase’s offers of 12 months at 0% APR used to be plentiful on its affinity cards, the available options have shrunk immensely. In fact, the number of cards that offer an intro 0% APR for 12 months has shrunk from well over 100 a half year ago, to just 7, by my latest count. The max balance transfer fee has also increased on many cards, from $75 to $99.
These changes appear to be working for Chase, as its trust was the one exception in October where delinquencies and defaults both declined. Unfortunately for deal-hunting credit consumers, this may translate into deals being leaner in the times ahead.
For reference, here are the 7 Chase offers that I found still carry a 0% intro APR for 12 months:
- Chase Platinum MasterCard
- Chase Platinum Visa
- Chase TravelPlus Rewards
- Disney Visa
- Sony Card
- GM Business Card World MasterCard
- Louisiana State University Athletics Card
On an off-topic note, does anyone else find it oddly coincidental that the only university-related card with 0% for 12 months represents a team playing for the national championship in football?
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Chase recently lowered my unused credit limit on a couple of cards citing unneeded credit lines. Then, I had to fax my paystub and bank statements before they reinstated the credit line.
I think Chase is being wary of cardholders with a lot of unused credit as they may file for bankruptcy for other reasons like mortgage default and just before doing so may max out their credit cards too.
Absolutely. I’ve seen the 0 down offers completely disappear from the mail. With the rise of bankruptcies I think many creditors are realizing that they simply cannot offer more and more credit since consumers will take on as much as given to them. With rising costs in other areas, delinquencies are through the roof.
Plus, many of these companies are now getting hit with right downs from other divisions and need to get their capital in order. It is odd that these offers are disappearing at the same time the Fed is lower rates. You would think you would see more but banks and lenders are facing heavy losses and only prime customers are getting the VIP treatment. But this has been the case for most of the past.