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Balance transfer credit cards have recently become more difficult to evaluate. This occurred to me recently when applying for several 0% APR offers. Not only do you need to consider the length of the balance transfer offer (6, 12 or 15 months), but you have to consider whether the card charges a balance transfer fee, if the transfer fee is capped, and what interest rate you’ll pay after the introductory offer expires.

Running all this information down for the many balance transfer deals available can be a chore. So we’ve down the work for you with the Balance Transfer Index, or BTI for short. Factoring in ALL the fees you will pay on each balance transfer offer, and also considering the rate that will apply after the 0% interest rates expires, we’ve developed a ranking list that will take a lot of the work out of evaluating balance transfer offers. The table below lists balance transfer credit cards from both national and regional card issuers, along with each cards BTI rating.

Our methodology and more details about the Balance Transfer Credit Cards Index are provided following the table. Clicking on a credit card name will take you to that card’s official website where you can get more information about the card.

Balance Transfer Index Table

#	Balance Transfer Card	6 Months	12 Months	24 Months	BTI Rating
1	Advanta Platinum with Unlimited Rewards BusinessCard (15 months)	1.8%	0.9%	3.87%	93.4
2	The Kiva BusinessCard (15 months)	1.8%	0.9%	3.87%	93.4
3	Advanta Customizable Platinum BusinessCard with Unlimited Rewards (15 months)	1.8%	0.9%	3.87%	93.4
4	The Kiva Credit Card for Business Professionals (15 months)	1.8%	0.9%	3.87%	93.4
5	Pulaski Bank Visa® Card (6 Months)	0%	3.25%	4.875%	91.9
6	IberiaBank Visa® Classic Card (6 Months)	0%	3.5%	5.25%	91.3
7	Pulaski Bank Gold Visa® Card (6 Months)	0%	4%	6%	90
8	IberiaBank Visa® Gold Cash Back Rewards Card (6 Months)	0%	4%	6%	90
9	Citi® Platinum Select® MasterCard® (12 Months)	6%	3%	4.87%	86.1
10	Citi® Diamond Preferred® Card (12 Months)	6%	3%	5%	86
11	AT&T Universal Savings Platinum Card (12 Months)	6%	3%	5.12%	85.9
12	AT&T Universal Savings and Rewards Card (12 Months)	6%	3%	5.62%	85.4
13	Citi CashReturns(SM) MasterCard® (12 Months)	6%	3%	6%	85
14	Citi® Diamond Preferred® Rewards Card (12 Months)	6%	3%	6.25%	84.8
15	Citi PremierPass® (12 Months)	6%	3%	6.62%	84.4
16	Discover® More(SM) Card (6 Months)	6%	3%	8.5%	82.5
17	Discover® Business Miles Card (12 Months)	6%	3%	10%	81
18	Discover® Open Road(SM) Card (6 Months)	6%	8.5%	9.75%	75.8
19	Miles by Discover® Card (6 Months)	6%	8.5%	9.75%	75.8
20	Citi® Platinum Select® Card for College Students (6 Months)	6%	8.62%	9.93%	75.5
21	Citi® mtv Platinum Select® Visa® Card for College Students (6 Months)	6%	9.12%	10.68%	74.2
22	Citi® Dividend Platinum Select® Card for College Students (6 Months)	6%	9.12%	10.68%	74.2
23	Citi® Bronze® / AAdvantage® Card for College Students (6 Months)	6%	9.62%	11.43%	72.9
24	Citi® Driver’s Edge® Card for College Students (6 Months)	6%	9.62%	11.43%	72.9
	Average	4.3%	4.67%	7.05%	84.0

Balance Transfer Index Methodology

We are constantly looking at ways to improve the BTI. So if you have any suggestions, please leave a comment or send us an email.

So how did we develop the index? First, we collected data on some of the most popular balance transfer credit cards available. These offers include some from household names like Citi and Discover, as well as cards from lessor known banks like Pulaski and IberiaBank. Next we dug into the terms and conditions of these offers to find any balance transfer fees charged, whether the fees are capped or unlimited, and what interest rate you’d pay once the 0% APR offer expired. In building the index, we had to make some assumptions:

1. We used the lowest APR for purchases available with each card when calculating the rate one would pay after the 0 balance transfer offer expires. The actual rate a cardholder pays will depend on their credit score and history.
2. We used the longest balance transfer period available for each card. For some cards, like many Citibank credit cards, the length of the balance transfer offer will depend in part on the credit history of the cardholder.
3. We also translated all fees into annualized interest rates. For example, we translated a 3% balance transfer fee on a 6 month offer into a 6% annualized interest rate in the “6 Month” column. That is why for some 12 month cards you will see 6% in the “6 Month” column and 3% in the “12 Month” column. The 3% balance transfer fee would equal an annualized 6% over 6 months, but just 3% over the full 12-month balance transfer period. This allowed us to more easily compare offers for each of the 6, 12 and 24-month periods.
4. Finally, for those offers that set a maximum balance transfer fee (which currently is just the Advanta cards), we assumed a $10,000 balance transfer amount in calculating the annualized percentage rates. As the actual amount of the balance transfer goes up (or down), this percentage rate would go down (or up).

With these assumptions in place, we calculated the balance transfer fees and interest charged by each card over three time periods: 6 months, 12 months, and 24 months. As each card’s 0% introductory rate expired, we used the lowest advertised purchase interest rate for each card. Two examples will help describe this methodology:

Example 1: The Advanta Kiva Credit Card for Working Professionals offers a 15-month 0% balance transfer. The offer charges a 3% balance transfer fee, but caps the fee at $90 maximum. After the 0 APR offer expires, the card charges an interest rate as low as 7.99%. For the 6-month column (assuming a $10,000 balance transfer), we converted the $90 transfer fee into a percentage ($90 / $10,000 = .9%) that was then annualized (.9% / 6 x 12) to arrive at 1.8%. Because the balance transfer offer last 15 months, the annualized percentage rate for the 12-month column went down to 0.9% ($90 / $10,000). Finally, the 24-month column was calculated by adding the 1.8% (year one) with 9 months of interest (at 7.99 annually) for the second year (remember, the 0% lasts 15 months with this card), and dividing by two.

Annualizing the balance transfer fees may be confusing at first, but it is the best way to compare offers across different time periods. Think of it this way. Given a set balance transfer fee, the longer you can take advantage of the 0% offer, the lower the cost in percentage terms

Example 2: The Pulaski Bank Visa Card offers a 6-month 0% balance transfer with no balance transfer fee. When the introductory rate expires, Pulaski charges an interest rate as low as 6.5%. Therefore, the 6-month column shows a cost of 0%, while the 12-month column shows an annualized percentage cost of 3.25% (0% for the first six months and 6.5% annual rate for the second six months). The 12-month column is calculated by adding the 12-month result (3.25) to the annual rate cardholders would pay in the second year (6.5), and annualizing the resulting by dividing by 2 (3.25 + 6.5 = 9.75 / 2 = 4.875).

Now if your head is spinning, you know why we went to the trouble to develop the Balance Transfer Index. The BTI is based on a high score of 100. Each of teh 6, 12 and 15-month categories is worth 33.3 points. We simply subtracted from 33.3 the percentages in each column for each card, and added the results. The BTI currently ranges from a high of 93.4 for the highest ranking balance transfer credit card to a low of 72.9.

How to Use the Balance Transfer Index to Pick a Credit Card

There are several ways to use the BTI to help you evaluate the best balance transfer credit cards.

1. The Balance Transfer Index: The first way is simply to use the BTI, which ranks the balance transfer offers based on the estimated cost of each card. Of course, this is our ranking based on what we believe are important factors. Every financial situation is different, and you will need to decided for yourself which card is right for you. But the BTI rankings gives you a good place to start.
2. Length of 0% offer: You may just be looking for the longest 0% offer available. If that’s the case, we’ve included the length of the offer after each card. Currently, Advanta is offering the longest balance transfer offer at 15-months, and not coincidentally, this fact (coupled with relatively low interest rates thereafter) ranks Advanta cards 1 through 4. If you want a personal credit card, Advanta offers The Advanta Kiva Credit Card for Working Professionals. Advanta’s other cards listed above are for those seeking small business credit cards.
3. No balance transfer fee offers: If your goal is to find a balance transfer fee that costs nothing, just check out those offers that have 0% in one or more of the columns. Currently, the no fee balance transfer cards are 6-month offers from Pulaski and IberiaBank.
4. Duration of offer: You may be looking for a balance transfer offer of a specific duration, such as 6 or 12 months. If that’s the case, just compare the annualized percentage rates in the respective columns.
5. Long term view: If you plan to carry a balance on the card for some time after the introductory rate expires, then you may want to focus on the 24-month column. Because the longest offer available is 15-months, the 24-month column reflects in part the lowest APR on purchases each card offers after the balance transfer offer expires. Remember, however, that the actual rate a credit card charges depends on the cardholder’s credit history, interest rates do change over time, and the percentages reflected in the BTI are annualized and take into account balance transfer fees.

A few things to remember when selecting a balance transfer card

You should keep several things in mind when reviewing the BTI and selecting a balance transfer credit card:

1. Terms change: Credit card terms and conditions can and do change. While we do our best to keep this information up to date, ALWAYS double check the terms and conditions of a credit card before applying.
2. Credit score matters: Your credit score will determine some of the terms and conditions of the credit card, including the interest rate applicable after the balance transfer offer expires.
3. Beyond balance transfers: The balance transfer feature is just one reward offered by these cards. Many of these cards also come with cash back rewards or travel rewards. As a general rule, the better the balance transfer offer, the fewer additional perks come with the card. So while some cards may be further down on the BTI, they often come with other rewards that may be important to you as well.

If you’d like more details on these cards, you can check out our balance transfer credit cards page, or click on any of the card names above to go to that card’s secure website.

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The Federal Reserve yesterday approved final rules aimed at protecting consumers by prohibiting certain unfair acts or practices by credit card issuers. The new rules were adopted under the Federal Trade Commission Act, and similar rules were concurrently adopted by the Office of Thrift Supervision and the National Credit Union Administration. The good news for consumers is that the new rules are comprehensive and address some significant abuse by some credit card issuers. The not so good news is that the rules do not take effect until July 1, 2010.

The rules cover both credit card practices and disclosures. Here is a rundown of the new regulations related to credit card practices and the impact they may have on your credit cards.

Fed Rules Prohibiting Certain Credit Card Practices

The Federal reserve adopted regulations prohibiting several common credit card practices:

• Time to Make Payments: The final rule prohibits banks from treating a payment
  as late unless the bank provides a reasonable amount of time for the consumer to make that payment. The rule provides what is called a “safe harbor” for banks that send credit card statements at least 21 days before the payment due date. This means that banks will be deemed to have complied with this regulation if they send out statements at least 21 days before they are due. It does not mean, however, that a bank has necessarily violated this rule if it gives consumers less than 21 days. Nevertheless, most banks are likely to take advantage of the safe harbor provision.
• Allocation of Payments: When different annual percentage rates (APRs) apply to different balances on a credit card account (e.g., purchases, balance transfers, cash advances), the final rule requires banks to allocate payments exceeding the minimum payment to the balance with the highest rate first or pro rata among all of the balances.

  For example, assume that a consumer had a $10,000 balance on a credit card, $5,000 from a balance transfer offer at 0%, and $5,000 from purchases at 12.99%. Today, most credit card companies would allocate 100% of payments exceeding the minimum required payment to the 0% balance transfer, resulting in the highest possible interest rate charge to the consumer.

  Under the new rule, any payments exceeding the minimum payment would have to be allocated either entirely to the high interest balance first, or allocated in equal parts to both the high interest and low interest balances. Until your credit cards comply with this rule, it is important to keep balance transfer credit cards separate from the cards you use day to day.

• Increasing Interest Rates: The rules require banks to disclose when the credit card is first obtained all interest rates that will apply to the account. The rule further prohibits increases in those rates, except in certain circumstances:
  1. If a rate disclosed at account opening expires after a specified period of time, banks may apply an increased rate that was also disclosed at account opening. This would apply, for example, with 0% introductory rates on balance transfers or purchases.
  2. Banks may increase a rate due to the operation of an index where the rate charged is variable. Note that while there are fixed rate credit cards, most use variable rates.
  3. After the first year, banks may increase a rate for new transactions, but only after giving you 45-day advance notice.
  4. Banks may increase a rate if the minimum payment is received more than 30 days after the due date.
• Two-Cycle Billing: The rules prohibit credit card issuers from calculating interest using a method referred to as “two-cycle billing.” Under this method, when a consumer pays the entire account balance one month, but does not do so the following month, the bank calculates interest for the second month using the account balance for days in the previous billing cycle as well as the current cycle. In other words, two-cycle billing can result in you paying interest on money you already paid back to the credit card company. It is a confusing, unfair and ridiculous way to calculate interest.
• Financing of Security Deposits and Fees: This part of the rule is aimed at “bad credit” credit cards, or subprime credit cards. Banks would be prohibited from financing security deposits and fees for credit availability (such as account-opening fees or membership fees) if charges assessed during the first 12 months would exceed 50 percent of the initial credit limit. The rule also limits the security deposits and fees charged at account opening to 25 percent of the initial credit limit and requires any additional amounts (up to 50 percent) to be spread evenly over at least the next five billing cycles.

  These credit cards are worse than payday loans. In some instances, a consumer is given a card with say $300 in credit, but then charged fees that take up 75% of the available credit or more. The Fed is putting an end to that practice.

On balance, these regulations seem quite sensible. But we should recognize that there will be some potentially negative consequences for consumers because of these regulations, too. For example, they will likely prevent some consumers from obtaining credit, and they may very well increase the cost of credit for others. One of the Fed’s Board members recognized this impact in a statement released yesterday:

As in most rulemakings, it is important that we try to strike the appropriate balance between competing points of view to achieve our objectives while minimizing the risk of unintended consequences. Unfair practices can impose significant costs on consumers. Likewise, the new rules will have a cost, too. In addition to extensive changes in disclosures, financial institutions will be required to make changes to their business models and alter certain practices. Although consumers might see some costs decline as new business models emerge, consumers might see other costs increase. Creditors may need to strengthen upfront underwriting efforts in the process. Over the long term, however, we expect the costs of making the required changes will be outweighed by the benefit of creating significantly clearer credit card pricing. In sum, our intent is to increase transparency and fairness in how credit card and deposit accounts operate, thereby enhancing competition and empowering consumers to better manage their accounts and avoid unnecessary costs.

Currently pending in Congress are two credit card reform statutes that could add further consumer protections if enacted.

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Click here to applyI recently took advantage of a 0% balance transfer offer on a Discover More credit card. Because I take advantage of just about every balance transfer opportunity I can find, I’ve gotten to know the websites of several card issuers (I always pay my bill online). And what impressed me is that the Discover website is really slick. It is by far the easiest to navigate, pay your card, transfer money, and redeem cashback and other rewards. And all of that got me focused on what is a very good credit card, the Discover More credit card. In fact, it was a Consumer Reports pick for best rewards credit card. So I thought I’d share a detailed review of this card and what it has to offer. [click to continue…]

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