Guess What Balance Transfer Credit Cards Are ‘Up To’

In the past, some of the key terms for 0% balance transfer credit cards have been the balance transfer fee and the duration of the no interest rate introductory period. Recently, however, a new and important term has crept into balance transfer offers. The term is "up to." While it may seem innocent enough, the card industry's use of the deceptively simple "up to"--as in a balance transfer "up to" 12 months--in marketing materials is something to take note of. In fact, the term is a close cousin of the phrase "as low as", which has been in use for some time to describe interest rates.

Believe it or not, there's quite a lot going on in those simple two and three word phrases, and it's worth understanding these changes in the industry before you apply for your next card. Let's first take a look at some examples, and then we'll look at what you can expect depending on your credit history.

Balance Transfers "Up To" 12 Months

Although they use different language, credit card issuers are now marketing the duration of balance transfers based on an applicant's credit history. Citi gets right to the point with the "up to" language for its Citi Platinum Select card:

Notice the "up to" language, which Citi explains is based on "your application and credit history." If you dig into the terms and conditions for details, here's what you'll find:

Length of your introductory period will be 0.0% for 12 months from the date of cardmembership on purchases and balance transfers, 0.0% for 9 months from the date of cardmembership for balance transfers and purchases or 0.0% for 6 months from the date of cardmembership for balance transfers and purchases depending on our review of your application and credit history.

Discover More Card also determines the length of its transfer offers based on credit history. Here's Discover's marketing material:

You'll see that the offer is for those customers with excellent credit. If you dig into the details with the Discover More Card, you'll find that this offer is for those with "excellent" or "good" credit. For those whose credit "needs improvement," the balance transfer is at 3.99%, not 0%. And just to show that this development isn't limited to Citi or Discover, here's a card offer from Chase:

As you can see, Chase distinguished between its "Elite" and "Premium" cardholders on the one hand, and its "Standard" customers on the other. For Elite and Premium, the balance transfer rate is good for 12 billing cycles. Standard pricing gets the rate for just three billing cycles.

Why does credit affect balance transfers?

What the credit card companies are doing with balance transfer offers is nothing new. It's called risk-based pricing. Applicants with better credit get better terms. Risk-based pricing has long been used to determine what interest rate will apply to the card. That's why you'll often see the interest rate advertised to be "as low as" 10.99%, for example. Or you might see the interest rate expressed as a range.

But risk-based pricing applied to balance transfer offers is a recent development. Over the past year or two, good balance transfer deals have become harder to find. Almost every card now tacks on balance transfer fees, and the duration of the offers have gotten shorter. Now we can add risk-based pricing to the mix.

What is "excellent" or "good" credit?

Some card issuers will describe what it means to have good credit. Discover, for example, defines "excellent" credit, "average" credit, and credit that "needs improvement." Here are the definitions:

• Excellent Credit: You are considered to have Excellent Credit if you pay all your bills on time and never miss payments.
• Average Credit: You are considered to have Average Credit if you pay most of your bills on time, and have made one or two late payments (more than 30 days past due) in the last year.
• Needs Improvement: Your credit Needs Improvement if you pay your bills, but have made three or more late payments (more than 30 days past due) within the past two years.

Maintaining a good credit score and credit history is important for a lot of reasons. Qualifying for the best terms available from a credit card is just one of them. Particularly once new credit card regulations go into affect, an applicant's credit history will become all the more important. So the next time you shop for a balance transfer card, keep in mind that the terms of the offer may vary based on the quality of your credit.