Companies often temporarily lower interest rates for promotional offers. The lower the interest rate, the less the cardholder ends up repaying. Balance transfers involving a transfer of funds from a high-interest credit card or a store card to another card results in a reduction in interest fees for the cardholder. It is in the cardholder's interest to seek out a low-interest rate. Once the promotional rate expires, any remaining transferred balance on the card is subject to the standard interest rate. The
Coronavirus has shortened the length of some promotional period for balance transfers. Promotional balance transfer rates are usually only guaranteed as long as the account is current, meaning the cardholder consistently makes at least the minimum monthly payment. Failure to make these payments usually results in reversion to the much higher standard rate. Cardholders with large debts can repeatedly transfer their balances to save significant interest repayments. The ideal approach is to switch to a new credit card the moment the previous one's teaser rate expires. To deter this type of behavior, some issuers stopped offering free balance transfers or impose a fee which can be a minimum amount or a percentage of outstanding balance being transferred. There is a
caveat: the credit card
contract may include a clause preventing the credit card holder from transferring the balance a second time within a certain period of time. While the promotional interest rate applies and the minimum payment value remains low the cardholder has little incentive to repay the card balance resulting in prolonged debt. In the US card issuers are under pressure from various Federal agencies to increase the minimum payment value. Card issuers have raised minimum payment requirements to encourage cardholders to pay off their balances. These changes have made it less attractive to carry debt, despite any promotional
APR. == References ==