Credit Card Companies and 0% BTs: Once Bitten, Twice Shy?

[PauletteGoddard]

Hi there...

Six years ago MBNA baited me with a 0% cash advance offer. As I owed near $10,000 at the time I took it and expedited my debt repayment by at least seven months. I made $144 from them.

It's been acquired since by Bank of America who won't go any lower than 2.9%, PLUS the transaction fee with no caps. Are they not being my good friend because of my past history, or is Bank of America not being my good friend because they sucks donkey dingly-danglies?

[MonkeyMama]

I think it's because they suck... LOL.

Credit cards are pretty stingy with the offers - Citi Bank is the only one I See consistently offering no fees. Though it seems easy enough to get lower interest rates elsewhere, but I am sure it is a B of A thing. I think in general so many people are starting to take advantage, I keep reading that 0% offers are getting harder to come by...

[autoxer]

I don't blame them, because I wouldn't lend out my money for a measly 2.9%

[click4credit]

Some credit card companies are being a bit tighter with the offers. One of the reasons is that when there are no fees it attracts so called 'card tarts'. This is people that jump from one no interest offer and then on to the next to avoid ever paying interest. As it's not cost effective and costs the banks money many have become less generous. Probably best to look for a good low interest credit card with a low ongoing rate and stick with it.

[jamai]

I don't blame them, because I wouldn't lend out my money for a measly 2.9%

2.9% x 1 million loanees = lots more profit compared to 10% with 10,000 loanees.. its a numbers game, the big boys can afford to play it, your local lender wouldn't dare.

[savingandinvesting]

Credit Cards

In general, because credit card lenders are lending against purchases that are largely consumables, they always structure it so that in aggregate they are compensated for this high risk. They are lending for purchases that they can not repossess and that typically have almost no value as soon as they are made.
This is in sharp contrast to a home loan or a car loan even, where the lender has some recourse - there is an asset that they can go after.
So aside from the fact that credit cards want to make money, they are also engaged in higher risk lending - often people don't pay back and they have difficulty getting the money back. Their rates will always be higher overall and these short term offers are exceptions and short-lived.

[autoxer]

2.9% x 1 million loanees = lots more profit compared to 10% with 10,000 loanees.. its a numbers game, the big boys can afford to play it, your local lender wouldn't dare.

All of the low rate offers are loss leaders for the credit card companies. They are lending money @ 2.9%, in a high risk environment, when they could easily earn 4 - 5% in lower risk bonds. They only offer those promotional rates to get more customers. Their profits come from the customers that pay the higher interest rates & other fees. They know that the low rate offers will bring enough customers that end up with higher rates, so financially it makes sense for them. They aren't exactly profiting from the customers that pay 2.9% interest, because they could be earning more elsewhere.