Credit Card Companies Moving Away From 0 APR Intro Offers
No surprise here – credit card issuers are approving fewer credit card applications. The credit crisis is may have been precipitated by bad mortgages, but that does not mean other facets of the economy based on credit are not affected. To the contrary, lenders are not giving credit for everything from auto loans to credit card applications.
I think fiscal responsibility will be the new watch-word. With that in mind, major banks and credit card companies have pulled many of the sweet deals that they once offered. Chief among these is the introductory 0% APR offers on balance transfers and new purchases. 12 months of interest free credit used to the norm, now many cards will only offer a 6 month intro period. Some have ceased giving zero percent interest period.
Playing a big role in this is the fact that far too many people were playing interest rate arbitrage with these introductory offers. They would transfer high interest balances to a new card and make the minimum payments. When the intro rates expired, they would do yet another transfer to a competing issuer and begin the cycle all over again.
It was a merry go round between Chase, Discover, Capital One, American Express, Citi and Bank of America. Well the ride has ended and the credit card issuers have jumped off. You see, another huge problem is the fact that people are now defaulting on their debts at a record pace. Whichever one of these companies are left holding the expired 0% APR introductory offers are going to be stuck with it on their books.
I fear that the credit crunch as it is unfolding now is not going to go away any time soon. We should all be prepared to pay more for credit in the form of higher rates and stricter lending practices. But who knows, maybe a good purge of our financial system will be a good thing. You know the old saying – what doesn’t kill you will only make you stronger.
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