With the recent launch of the newest addition to its “More” series, Discover became the first issuer since the beginning of the Great Recession to offer a credit card that charges neither fees nor interest for balance transfer transactions.
While this combination of benefits was once common, both the downturn of the economy and the reform that followed led to its temporary extinction. Before the Great Recession, credit card companies eagerly offered consumers free balance transfers because the fine print of such agreements contained the stipulation that interest rates would skyrocket to above 15% should a payment be late by even a single day.
Therefore, if a consumer misplaced a credit card statement or sent a payment a few days late after being on vacation, he would be punished in the same way as someone who spent beyond his means.
Such credit cards gave no margin for error to a demographic that obviously needed one. Consumers interested in cheap balance transfers had acquired debt one way or another and were thus unrealistically expected to display eminently perfect credit card use. However, there was no incentive to restructure these cards because even though issuers lost money on those consumers who never missed a payment, they made enough off those who did in order to profit greatly overall.
These predatory practices compounded consumers’ debt problems and helped expedite the overall decline of American credit, which in turn contributed to the onset of the Great Recession.
The reincarnation of these no-fee, 0% balance transfer credit cards, led by Discover, stands to be much more consumer friendly though.
In reaction to the Great Recession, legislation was passed to eliminate many of the predatory practices that had previously pervaded the credit card industry. This new law, known as the CARD Act, significantly strengthened consumers’ credit card bill of rights and made it illegal for credit card companies to change a credit card’s interest rate on existing balances unless a consumer became at least 60 days delinquent.
The Discover More – No Balance Transfer Fee Credit Card thus comes with no asterisk. Its benefit is not overshadowed by the looming prospect of an increased interest rate triggered by the slightest of mistakes. It is a straightforward, beneficial product and industry insiders are greeting it with enthusiasm.
“Discover’s new balance transfer credit card is an excellent tool for consumers looking to lower the cost of their debt,” said Odysseas Papadimitriou, the CEO and Founder of the credit card comparison website WalletHub.com. “Unlike its pre-recession predecessors, this product presents opportunity rather than surprises.”
As long as a consumer can pay down his balance in its entirety prior to the 12 month 0% interest period expiring, switching debt to the new Discover card will provide significant savings.
As a result, expect this Discover card to quickly gain popularity and numerous cards like it to be launched in the near future. Soon no balance transfer fee credit cards and 0% balance transfer credit cards will no longer be separate things.