Released: December 26, 2006

Ugly credit card trends

Source: Aleksandra Todorova, SmartMoney

Wonder what credit card companies have in stock for you in the coming year? It’s no gift card. From fee hikes to new technologies that encourage spending, credit-card companies will look to improve their bottom line at your expense.

Here are five credit-card trends that could affect your wallet in 2007, and how to avoid getting burned:

The $300 balance transfer fee Low-rate balance transfers can be a great money saver. Consider this: Transferring a $10,000 balance from an 18% APR credit card to one that comes with a 5.99% APR for the life of the loan — a common offer these days — will save you $6,253 in interest, assuming a $200 monthly payment. You’ll be debt-free three years sooner.

But this scenario doesn’t factor in the balance transfer fee. And while no-fee promotions were common in the past few years and balance transfer fees were generally capped at $50 or $75, such offers are getting harder to come by, says Curtis Arnold, founder of the credit card information web site CardRatings.com. Over the past few months, for example, Citibank and Bank of America have told some of their card holders they are removing the cap on balance transfer fees. The result? That $10,000 balance transfer would cost you $300 assuming a 3% fee. “For a fee to go up 300% overnight, that’s mind-boggling,” Arnold says. His advice: Before authorizing a balance transfer, know what you’re paying. “In your offer, if there’s a reference to a minimum but no reference to a maximum charge, that should tip you off,” he says.

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