0% credit card offers are back

This post comes from MSN Money's Liz Pulliam Weston.

Interest-free balance transfer offers started drying up more than two years ago with the beginnings of the credit crunch, as I wrote in my February 2008 column "The credit card party is officially over."

Now, as default rates fall and credit card issuers get bolder about winning market share, 0% offers have come roaring back.

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"It's kind of shocking how aggressive some of these offers are, because of lot of experts thought these balance transfer offers were an endangered species," said Curtis Arnold, the founder of card-comparison site CardRatings.com. "I didn't think we'd see their extinction, but I never thought it would rebound as fast as it has."

Arnold points to the Citibank Platinum Select MasterCard as a prime example. Citi started the year offering a 0% balance transfer offer for 12 months. Then Citibank sweetened the term to extend to 15 months, then 18 months. Now, qualified applicants can get 0% for 21 months, with 0% on purchases for 12 months, and the fee has dropped from 5% of the balance to 3%.

"These offers have made a very big comeback," agreed Bill Hardekopf of LowCards.com. "When the economy turned bad, many issuers cut these 0% offers way back to three to six months. Now you can find some very impressive offers."

Other examples, Hardekopf said, include:

• Capital One Platinum Prestige: 0% on balance transfers and purchases through September 2011 (12 months).
• Discover More: 0% on balance transfers for 12 months; 0% on purchases for six months.
• Chase Freedom: 0% on balance transfers for 12 billing cycles; 0% on purchases for six billing cycles.

Many issuers are mailing even better deals to select customers, either their own or those whose business they hope to win, the experts said. But while the offers are improving, the rules for who gets them and how they work have changed substantially. Post continues after video.

For one thing, you need excellent credit.

"Regardless of how much or little they promote such offers, they are now more picky about who qualifies -- probably raising the FICO score cutoff from 720 to 750, though this varies by issuer," said Ben Woolsey, the director of marketing and consumer research for CreditCards.com. "Many of these offers are by invitation only or are being tested to select groups, but others are freely advertised online so people should be able to call and request such a deal -- the catch being they won't necessarily qualify."

Then there are those fees. Gone are the days when people could write themselves a fee-free, 0% balance transfer check, deposit it in an online bank and reel in the profits, as I wrote in "0% daredevils chase 'free' cash." These days, fees for balance transfer offers range from 3% to 5%, with no caps.

Also, "go to" rates -- the regular interest rate to which the card reverts when the 0% rate is over -- are substantially higher than in the past, Arnold said. That means borrowers need to practice even more vigilance.

"If you hit a bump in the road and you can't pay off the debt [before the 0% rate expires], you could get hit with a 22% rate or higher," Arnold said. "That would quickly wipe out any savings."

If you're tempted by one of these offers, here’s what you need to do:

Check your scores. To know if you're in the running for the best deals, you'll want to see your FICO scores, which are the ones most lenders use. (If a site offers free scores, they’re probably not FICOs; to get your FICOs, you need to buy them for $15.95 each from MyFico.com.) Don't worry that checking your scores will drive them down; it doesn't.

Watch for the "up to" trap. You might apply for a card that offers 0% for "up to" 18 months but get approved for a card that offers that rate for just six months. Since you're paying the balance transfer fee regardless of the deal's duration, you want to shop for a "what you see is what you get" offer instead.

Check with your current issuers and your credit union. You might qualify for a deal that isn’t advertised. Also, if you currently have a low-rate offer, ask to have it extended. "We've had a few readers report that they've had success calling to extend their 0% window, by threatening to switch cards," said Tim Chen, the founder and CEO of NerdWallet. "It's definitely something we encourage users to do at the end of the teaser period."

Do the math. When you're sorting through offers, figure out how long you're likely to have this debt, Chen said. Then factor in the transfer fee, the introductory rate and time period, and the ongoing rate to see what your overall cost is likely to be. You can use NerdWallet's balance transfer tool to help with the calculations.

Consider skipping the teaser rates if you have a lot of debt. If your debt is so great that you can't get it paid off before the 0% rate expires, consider a card with a somewhat higher rate that extends for longer, such as Simmons First Visa Platinum's 7.25% "everyday" rate or PenFed’s 7.49% rate for 36 months.

Use the low rate to actually pay off your debt. Zero percent offers can be a useful tool for people who want to really tackle and pay off their debt, said Dan Ray, the CEO of CreditCards.com, because "they offer some breathing room during which you can pay down debt without worrying about interest charges adding to the damage."

"But if you think they're just a convenient way to push off dealing with a problem, they're wrong for you," Ray said. "Your debt will just grow and grow until that can gets too big to kick down the road anymore."

Liz Pulliam Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "Your Credit Score: Your Money & What's at Stake." Weston's award-winning columns appear twice weekly, exclusively on MSN Money. She also answers reader questions on the Your Money message board and helps middle-class families cope at Building a Brighter Future.

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