Banks abandoned the popular credit card promotion because of concerns that borrowers struggling with the coronavirus during the crisis might leave them with past due loans.
According to people, balance sheet transfer offers, which usually encourage borrowers to transfer their debts to a new lender in exchange for a temporary interest rate of 0%, have plummeted at banks, including JPMorgan Chase, Citigroup, Bank of America, Barclays and Capital One. with knowledge in every company.
According to a company spokeswoman, American Express took the most radical step, completely abandoning the product.
“At this time, we do not offer balance transfers for all of our card products,” American Express said in a statement. “From time to time, we make adjustments to our proposals to ensure responsible risk management for our customers and the company.”
When the economy was booming, credit card issuers fell on themselves to lure borrowers and their debts by sending hundreds of millions of interest-free applications. Banks earn money on transfer fees, usually around 3%, and begin to earn interest on debt after a promotion period, usually lasting from six months to two years.
But banks were burned during the 2008 recession, when, according to sources, the default balance transfer users were among the highest in the industry. Some suggested that borrowers used a balance transfer after they began to worry about the safety of their work or even after they lost their jobs, which puts them at risk of default.
Now lenders are more picky about who they make interest-free offers to, in favor of customers with higher credit ratings and other benefits, people say. More than 40 million Americans have applied for unemployment benefits since the start of the pandemic.
At the same time, the industry offered patience to many borrowers during a pandemic, abandoning overdue commissions and interest for months. For many customers, these programs are ending soon, and the question remains whether they will resume payments.
The irony is that although banks have never been so full of deposits, taking $ 2 trillion since February, they are refusing credit products that they consider risky in their mortgage, car and credit cards.
Industry movement robs borrowers of one of the best ways to reduce credit card debt. When used correctly, balance transfer cards can save thousands of dollars in interest payments over time.
Janet Scott, a Florida-based retired accountant, planned to use balance transfers to pay off her daughter’s school debt. Scott recently said that eight banks informed her that they no longer have them. Just a few months ago, they inundated her with offers.
“I have an excellent credit rating, I act on all my accounts, I pay the balance in full every month,” Scott said. “It just doesn’t make any sense to me.”