Reader Question: How will the New Credit Card Law Affect Balance Transfer Offers

A reader recently asked whether the new credit card law that goes into effect next month will affect the richness of balance transfer offers:

I was wondering what the new federal regulations/laws for credit card companies coming up in February will have on the richness of these balance transfer offers if any?

The short answer is, it already has. One year ago, I obtained a no fee balance transfer offer for 12-months. Today, you can’t find a no fee 0% balance transfer. They just don’t exist. You can, however, find longer term balance transfers. In fact, Citi currently offers one where the 0% rate lasts for 18 months. But here’s what you need to know about the new law.

Part of the new law changes the way credit card companies apply payments to your balance. For example, let’s assume you have a $5,000 balance at 0% from a balance transfer, and you also have $1,000 on the card from purchases at 11.99%. Currently, credit card companies apply any payments above the minimum required to the 0% balance. Only when it is paid in full do payments go toward the 11.99% balance.

The new law changes all of this. Starting next month when the credit card law becomes effective, payments above the minimum must be applied to the highest interest rate balances first. The result, of course, is that consumers will pay less interest, and credit card companies will make less money on balance transfers.

While this sounds great for consumers, and it is, it comes at a price. The good news is that we’ve already paid the price. The price is fewer balance transfer credit cards and higher transfer fees. Following the enactment of the credit card law, most 12-month deals went down to 6 months. And some cards started charging balance transfer fees as high as 5%. I suspect part of these changes had as much to do with the credit crisis last year as they did with the credit card law.

But now several good 12 to 18-month 0% APR on balance transfers have come back. And I don’t think the law going into effect next month will change those offers. The credit card companies are already prepared for the law and have priced it into their credit cards.

But these offers won’t last forever. I suspect what will really curtail balance transfer offers will be rising interest rates. While rates may not go up substantially in a month or two, a year from now could be a whole different story.

If you are searching for a balance transfer deal, there are several 12-month 0% offers still available:

  • Discover: The Discover it  offers 0% on balance transfer for up to 14 months and 0% on purchases for 14 months. The card also has a cash back feature that pays up to 5% cash rewards on purchases (go to our Discover it review for more details).
  • Chase: Both the Chase Freedom and Chase Slate offer 0% introductory rates. You can get more details on these cards on our Chase credit cards review page.
Topics: Credit Cards

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5 Responses to “Reader Question: How will the New Credit Card Law Affect Balance Transfer Offers”


    I have two balance transfers from same bank with 0% interest-one is due 7/10 and the other is due 1/11.Due to the fact that both are o% interest where should the payment be applied.I feel that payment shgould be applied to the one that is coming due first and then anything extra be applied to the other. In this matter the one due 7/10 can be payed off by 7/10 and then all other payments will go to the one dues 1/11.Please direst me if I am wrong about this. The bank that I am dealing with is CitiBank.Called several times and was told payment must go to the highest AMOUNT OF MONIES due regardless that both transfers are 0%.I have asked for something in writing showing me this and still have not received anything after about three requests. Can someone please help me out.

    • DR

      Elizabeth, if you have two credit cards,, I assume you are making two separate payments. What you pay to one card should not affect what you pay to the other. If you want to make higher payments on the card due 7/10, you should be able to, so long as your are making at least the minimum payment on both cards.

    • Lily Wu

      Elizabeth, if you have these 2 balance transfer offers with citi, they will apply all your payments to the one that is due 1/11. I just got off the phone with citi because I am in a similar situation. I have 3 balance transfers with them at 0%: 2 are due 11/10 and 1 is due 11/11. They just confirmed that all my payments are being applied to the one that is due 11/11, and nothing has been applied to the one due 11/10. My 11/10 balance is going to remain unchanged when it is due and I will be subject to the 19.99% interest going forward. It is a very deceptive practice and I can’t seem to find any regulation about this. I am going to keep researching, and I will file a complaint with consumer reports. You should write to your congressman to see if they can shed any light on this.They should not be allowed to do this.

  2. Web User

    your article reflects things that change next month, and 12 months ago. You shoul probably add a date to your articles, as I have no clue when this article was written, therefore, i have no idea what you are talking about, which ultimately means this is a useless article.

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